JUNE 1/2018/OUR USUAL AND CUSTOMARY RAID ON GOLD/SILVER ON THE JOBS REPORT/GOLD DOWN $5.10 TO $1295.70/SILVER DOWN 3 CENTS TO $16.43/ANOTHER FICTITIOUS JOBS REPORT : OF THE SUPPOSED 223,000 JOB GAINS, ALMOST 100% COMES FROM THE B/D PLUG AT 215,000 /ITALY APPROVES THEIR NEW FINANCE MINISTER AND HE IS MORE EUROSKEPTIC THAT THE PREVIOUS ONE/SPANISH PARLIAMENT IMPEACHES RAJOY AND WE NOW HAVE A NEW SOCIALIST GOVERNMENT IN SPAIN/DEUTSCHE BANK DOWNGRADED BY S AND P AND IN TROUBLE/BRAZIL’S TROUBLES GOES FROM BAD TO WORSE AS PETROBRAS’ CEO QUITS SUDDENLY/THE COUNTRY IS STILL UNDERGOING A TRUCKING STRIKE AS THE ENTIRE COUNTRY IS PARALYZED: ITS GDP HAS FALLEN BY 38%/ ONE SWAMP STORY FOR YOU TONIGHT/

 

GOLD: $1295.70 DOWN  $5.10 (COMEX TO COMEX CLOSINGS)

Silver: $16.43 DOWN  3 CENTS (COMEX TO COMEX CLOSINGS)

Closing access prices:

Gold $1293.80

silver: $16.42

TODAY IS FIRST DAY NOTICE FOR BOTH THE GOLD AND SILVER COMEX CONTRACTS.

For comex gold:

JUNE/

NUMBER OF NOTICES FILED TODAY FOR JUNE CONTRACT:101 NOTICE(S) FOR 10100 OZ.

TOTAL NOTICES SO FAR 176 FOR 17600 OZ (0.5474 tonnes)

For silver:

JUNE

59 NOTICE(S) FILED TODAY FOR

295,000 OZ/

Total number of notices filed so far this month: 415 for 2,075,000 oz

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Bitcoin: BID $7495/OFFER $7595: UP $60(morning)

Bitcoin: BID/ $7387/offer $7487: down $52  (CLOSING/5 PM)

end

First Shanghai gold fix comes at 10 pm est

The second Shanghai gold fix:  2:15 pm

First Shanghai gold fix gold: 10 pm est: 1304.45

NY price  at the same time: 1299.10

PREMIUM TO NY SPOT: $5.35

Second gold fix early this morning: 1303.93

USA gold at the exact same time:1298.60

PREMIUM TO NY SPOT:  $5.33

AGAIN, SHANGHAI REJECTS NEW YORK PRICING.

WE WILL NOT PROVIDE LONDON FIXES AS THEY ARE NOT ACCURATE AS TO WHAT IS GOING ON AT THE SAME TIME FRAME.

Let us have a look at the data for today

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In silver, the total OPEN INTEREST ROSE BY AN STRONG 1065 CONTRACTS FROM  209,358  UP TO 210,423 ACCOMPANYING YESTERDAY’S  7 CENT FALL IN SILVER PRICING.    WE ARE NOW WITNESSING OUR USUAL AND CUSTOMARY COMEX LONG LIQUIDATION AS WE ENTERED INTO THE NON ACTIVE DELIVERY MONTH OF JUNE AS LONGS PACK THEIR BAGS AND MIGRATE OVER TO LONDON.  WE WERE  NOTIFIED THAT WE HAD A STRONG SIZED NUMBER OF COMEX LONGS TRANSFERRING THEIR CONTRACTS TO LONDON THROUGH THE EFP :  1725 EFP’S FOR JULY AND ZERO FOR ALL  OTHER MONTHS  AND THEREFORE TOTAL ISSUANCE OF 1725 CONTRACTS. WITH THE TRANSFER OF 1725 CONTRACTS, WHAT THE CME IS STATING IS THAT THERE IS NO SILVER (OR GOLD) TO BE DELIVERED UPON AT THE COMEX AS THEY MUST EXPORT THEIR OBLIGATION TO LONDON. ALSO KEEP IN MIND THAT THERE CAN BE A DELAY OF 24-48 HRS IN THE ISSUING OF EFP’S. THE 1725 EFP CONTRACTS TRANSLATES INTO 8.625 MILLION OZ  ACCOMPANYING:

1.THE 7 CENT FALL IN  SILVER PRICE  AT THE COMEX AND

2. THE STRONG AMOUNT OF SILVER OUNCES STANDING FOR JUNE COMEX DELIVERY. (3.630 MILLION OZ) DESPITE IT BEING A NON ACTIVE DELIVERY MONTH.

ACCUMULATION FOR EFP’S/SILVER/J.P.MORGAN’S HOUSE OF BRIBES, / STARTING FROM FIRST DAY NOTICE/FOR MONTH OF JUNE: 

1725 CONTRACTS (FOR 1 TRADING DAYS TOTAL 1725 CONTRACTS) OR 8.625MILLION OZ: (AVERAGE PER DAY: 1725 CONTRACTS OR 8.625 MILLION OZ/DAY)

TO GIVE YOU AN IDEA AS TO THE HUGE SUPPLY THIS MONTH IN SILVER:  SO FAR THIS MONTH:  8.625 MILLION PAPER OZ HAVE MORPHED OVER TO LONDON. THIS REPRESENTS AROUND 1.23% OF ANNUAL GLOBAL PRODUCTION (EX CHINA EX RUSSIA)

ACCUMULATION IN YEAR 2018 TO DATE SILVER EFP’S:            1,322.9      MILLION OZ.

ACCUMULATION FOR JAN 2018:                                               236.879     MILLION OZ

ACCUMULATION FOR FEB 2018:                                               244.95         MILLION OZ

ACCUMULATION FOR MARCH 2018:                                       236.67         MILLION OZ

ACCUMULATION FOR APRIL 2018:                                          385.75         MILLION OZ

ACCUMULATION FOR MAY 2018:                                            210.05       MILLION OZ

RESULT: WE HAD A CONSIDERABLE SIZED INCREASE IN COMEX OI SILVER COMEX OF 1065 WITH THE 7 CENT FALL IN SILVER PRICE.  WE HAVE NOW ENTERED THE NEW NON ACTIVE MONTH OF JUNE.   THE CME NOTIFIED US THAT IN FACT WE HAD AN STRONG SIZED EFP ISSUANCE OF 1725 CONTRACTS WHICH EXITED OUT OF THE SILVER COMEX AND TRANSFERRED THEIR OI TO LONDON AS FORWARDS. SPECULATORS CONTINUED THEIR INTEREST IN ATTACKING THE SILVER COMEX FOR PHYSICAL SILVER (SEE COMEX DATA) . FROM THE CME DATA:  1725 EFP CONTRACTS FOR JULY, AND ZERO FOR ALL OVER MONTHS   FOR  A DELIVERABLE FORWARD CONTRACT OVER IN LONDON WITH A FIAT BONUS (TOTAL: 1725). TODAY WE GAINED A HUGE 2790 TOTAL OI CONTRACTS  ON THE TWO EXCHANGES: i.e.1725 OPEN INTEREST CONTRACTS HEADED FOR LONDON  (EFP’s) TOGETHER WITH AN INCREASE OF 1065  OI COMEX CONTRACTS. AND ALL OF THIS HAPPENED WITH THE 7 CENT FALL IN PRICE OF SILVER  AND A CLOSING PRICE OF $16.46 WITH RESPECT TO YESTERDAY’S TRADING. YET WE STILL HAVE A GIGANTIC AMOUNT OF SILVER STANDING AT THE COMEX FOR DELIVERY IN THIS NON  ACTIVE JUNE DELIVERY MONTH. IT SURE LOOKS LIKE A FAILED BANKER SHORT COVERING EXERCISE!!

In ounces AT THE COMEX, the OI is still represented by OVER 1 BILLION oz i.e. 1.052 MILLION OZ TO BE EXACT or 151% of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT JUNE MONTH/ THEY FILED AT THE COMEX: 59 NOTICE(S) FOR 295,000 OZ OF SILVER

IN SILVER, WE HAVE NOW SET THE NEW RECORD OF OPEN INTEREST AT 243,411 AND AGAIN THIS HAS BEEN SET WITH A LOW PRICE OF $16.51  ON APRIL 9.2018.

ON THE DEMAND SIDE WE HAVE THE FOLLOWING:

  1. HUGE AMOUNTS OF SILVER STANDING FOR DELIVERY  (MARCH: 27 MILLION OZ , APRIL: 2.485 MILLION OZ AND MAY: 36.285 MILLION OZ /AND JUNE  (3.630 MILLION OZ SO FAR)
  2. HUGE RECORD OPEN INTEREST IN SILVER 243,411 CONTRACTS (OR 1.217 BILLION OZ/ SET APRIL 9/2018
  3. HUGE ANNUAL EFP’S ISSUANCE EQUAL TO 2.9 BILLION OZ OR 400% OF SILVER ANNUAL PRODUCTION/2017
  4. RECORD SETTING EFP ISSUANCE FOR ANY MONTH IN SILVER; APRIL/2018/ 385.75 MILLION OZ/ (FINAL)

AND YET, WITH THE EXTREMELY HIGH EFP ISSUANCE, WE HAVE A CONTINUAL LOW PRICE OF SILVER DESPITE THE ABOVE HUGE DEMAND.  TO ME THE ONLY ANSWER IS THAT WE HAVE SOVEREIGN  (CHINA) WHO IS ENDEAVOURING TO GOBBLE UP ALL AVAILABLE PHYSICAL SILVER NO MATTER WHERE, EXACTLY WHAT J.P.MORGAN IS DOING. AND IT IS MY BELIEF THAT J.P.MORGAN IS HOLDING ITS SILVER FOR ITS BENEFICIAL OWNER..THE USA GOVERNMENT WHO IN TURN IS HOLDING THAT SILVER FOR CHINA.(FOR A SILVER LOAN REPAYMENT). IT ALSO LOOKS LIKE BANKER CAPITULATION IN SILVER AS THEY STRUGGLE TO REMOVE SOME OF THEIR HUGE OBLIGATIONS.

In gold, the open interest FELL BY A FAIR 787 CONTRACTS DOWN TO 459,124 DESPITE THE LOSS IN THE GOLD PRICE/YESTERDAY’S TRADING (LOSS OF $1.60).  WE ARE NOW IN THE  ACTIVE DELIVERY MONTH OF JUNE. NO DOUBT THE BOYS ARE CASHING IN THEIR COMEX LONGS TO BEGIN THE PROCESS TO MOVE INTO LONDON FORWARDS.  THE CME RELEASED THE DATA FOR EFP ISSUANCAND IT TOTALED A GOOD SIZED 7,881 CONTRACTS :   JUNE SAW THE ISSUANCE OF 0 CONTRACTS , AND AUGUST SAW THE ISSUANCE OF:  7881 CONTRACTS WITH ALL OTHER MONTHS ZERO.  The new OI for the gold complex rests at 459,124. ALSO REMEMBER THAT THERE WILL BE A DELAY IN THE ISSUANCE OF EFP’S.  THE BANKERS REMOVE LONG POSITIONS OF COMEX GOLD IMMEDIATELY.  THEN THEY ORCHESTRATE THEIR PRIVATE EFP DEAL WITH THE LONGS AND THAT COULD TAKE AN ADDITIONAL 48 HRS SO WE GENERALLY DO NOT GET A MATCH WITH RESPECT TO DEPARTING COMEX LONGS AND NEW EFP LONG TRANSFERS. . EVEN THOUGH THE BANKERS ISSUED THESE MONSTROUS EFPS, THE OBLIGATION STILL RESTS WITH THE BANKERS TO SUPPLY METAL BUT IT TRANSFERS THE RISK TO A LONDON BANKER OBLIGATION AND NOT A NEW YORK COMEX OBLIGATION. LONGS RECEIVE A FIAT BONUS TOGETHER WITH A LONG LONDON FORWARD. THUS, BY THESE ACTIONS, THE BANKERS AT THE COMEX HAVE JUST STATED THAT THEY HAVE NO APPRECIABLE METAL!! THIS IS A MASSIVE FRAUD: THEY CANNOT SUPPLY ANY METAL TO OUR COMEX LONGS BUT THEY ARE QUITE WILLING TO SUPPLY MASSIVE NON BACKED GOLD (AND SILVER) PAPER KNOWING THAT THEY HAVE NO METAL TO SATISFY OUR LONGS. LONDON IS NOW SEVERELY BACKWARD IN BOTH GOLD AND SILVER  AND WE ARE WITNESSING DELAYS IN ACTUAL DELIVERIES.

IN ESSENCE WE HAVE A STRONG SIZED OI GAIN IN TOTAL CONTRACTS ON THE TWO EXCHANGES: 787 OI CONTRACTS DECREASED AT THE COMEX AND AN GOOD SIZED 7,881 EFP OI CONTRACTS WHICH NAVIGATED OVER TO LONDON.THUS  TOTAL OI GAIN: 7094 CONTRACTS OR 709,400 OZ = 22.06 TONNES. AND ALL OF THIS DEMAND OCCURRED WITH A LOSS OF $1.60

YESTERDAY, WE HAD 17163  EFP’S ISSUED.

ACCUMULATION OF EFP’S GOLD AT J.P. MORGAN’S HOUSE OF BRIBES: (EXCHANGE FOR PHYSICAL) FOR THE MONTH OF MAY : 7881 CONTRACTS OR 788,100  OZ OR 24.51 TONNES (1 TRADING DAYS AND THUS AVERAGING: 7881 EFP CONTRACTS PER TRADING DAY OR 788,100 OZ/ TRADING DAY),,

TO GIVE YOU AN IDEA AS TO THE HUGE SIZE OF THESE EFP TRANSFERS :  THIS MONTH IN 1 TRADING DAYS IN  TONNES: 24.51 TONNES

TOTAL ANNUAL GOLD PRODUCTION, 2017, THROUGHOUT THE WORLD EX CHINA EX RUSSIA: 2555 TONNES

THUS EFP TRANSFERS REPRESENTS 24.51/2550 x 100% TONNES =  0.96% OF GLOBAL ANNUAL PRODUCTION SO FAR IN APRIL ALONE.*** THE ACCUMULATION OF EFP CONTRACTS IS RISING PER MONTH.

ACCUMULATION OF GOLD EFP’S YEAR 2018 TO DATE:  3,476.71*  TONNES   *SURPASSED ANNUAL PROD’N

ACCUMULATION OF GOLD EFP’S FOR JANUARY 2018:           653.22  TONNES

ACCUMULATION OF GOLD EFP’S FOR FEBRUARY 2018:         649.45 TONNES

ACCUMULATION OF GOLD EFP’S FOR MARCH 2018:                741.89 TONNES  (22 TRADING DAYS)

ACCUMULATION OF GOLD EFP’S FOR APRIL 2018:                   713.84 TONNES  (21 TRADING DAYS)

ACCUMULATION OF GOLD EFP’S FOR MAY 2018:                     693.80 TONNES ( 22 TRADING DAYS)

WHAT IS ALARMING TO ME, ACCORDING TO OUR LONDON EXPERT ANDREW MAGUIRE IS THAT THESE EFP’S ARE BEING TRANSFERRED TO WHAT ARE CALLED SERIAL FORWARD CONTRACT OBLIGATIONS AND THESE CONTRACTS ARE LESS THAN 14 DAYS.  ANYTHING GREATER THAN 14 DAYS, THESE MUST BE RECORDED AND SENT TO THE COMPTROLLER, GREAT BRITAIN TO MONITOR RISK TO THE BANKING SYSTEM.  IF THIS IS INDEED TRUE, THEN THIS IS A MASSIVE CONSPIRACY TO DEFRAUD AS WE NOW WITNESS A MONSTROUS TOTAL EFP’S ISSUANCE AS IT HEADS INTO THE STRATOSPHERE

Result: A FAIR SIZED DECREASE IN OI AT THE COMEX OF 787 WITH THE $1.60 LOSS  IN PRICE // GOLD TRADING YESTERDAY ($1.60 FALL).  WE ALSO HAD AN GOOD SIZED NUMBER OF COMEX LONG TRANSFERRING TO LONDON THROUGH THE EFP ROUTE: 7,881 CONTRACTS AS THESE HAVE ALREADY BEEN NEGOTIATED AND CONFIRMED.   THERE OBVIOUSLY DOES NOT SEEM TO BE MUCH PHYSICAL GOLD AT THE COMEX.  I GUESS IT EXPLAINS THE HUGE ISSUANCE OF EFP’S…THERE IS HARDLY ANY GOLD PRESENT AT THE GOLD COMEX FOR DELIVERY PURPOSES. IF YOU TAKE INTO ACCOUNT THE 7,881 EFP CONTRACTS ISSUED, WE HAD AN STRONG SIZED NET GAIN OF 7094 CONTRACTS IN TOTAL OPEN INTEREST  ON THE TWO EXCHANGES:

7,889 CONTRACTS MOVE TO LONDON AND 787 CONTRACTS INCREASED AT THE COMEX. (in tonnes, the GAIN in total oi equates to 22.06 TONNES). ..AND BELIEVE IT OR NOT BUT ALL OF THIS DEMAND OCCURRED AT THE COMEX WITH A LOSS OF $1.60 IN TRADING!!!.

we had: 101 notice(s) filed upon for 10,100 oz of gold at the comex.

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With respect to our two criminal funds, the GLD and the SLV:

GLD...

WITH GOLD  DOWN $5.10  TODAY: / A HUGE CHANGE IN GOLD INVENTORY AT THE GLD/ A WITHDRAWAL OF 4.42 TONNES WHICH NO DOUBT WAS USED IN THE RAID TODAY/  /

Inventory rests tonight: 847.03 tonnes.

SLV/

WITH SILVER DOWN 3 CENTS TODAY NO CHANGES IN THE SILVER INVENTORY AT  THE SLV INVENTORY/

/INVENTORY RESTS AT 322.039 MILLION OZ/

end

First, here is an outline of what will be discussed tonight:

1. Today, we had the open interest in SILVER ROSE BY A STRONG SIZED 1065 CONTRACTS from  209,358 UP TO 210,423 (AND, CLOSER TO THE  NEW COMEX RECORD SET /APRIL 9/2017 AT 243,411/SILVER PRICE AT THAT DAY: $16.53). THE PREVIOUS RECORD OTHER THAN WAS ESTABLISHED AT: 234,787, SET ON APRIL 21.2017 OVER ONE YEAR AGO.  THE PRICE OF SILVER ON THAT DAY: $17.89.OUR CUSTOMARY MIGRATION OF COMEX LONGS MORPH INTO LONDON FORWARDS CONTINUES AS OUR BANKERS USED THEIR EMERGENCY PROCEDURE TO ISSUE:   (WE DO NOT GET A LOOK AT THESE CONTRACTS AS IT IS PRIVATE BUT THE CFTC DOES AUDIT THEM), 1725 EFP’S FOR JULY AND ALL OTHER MONTHS: ZERO. TOTAL EFP ISSUANCE: 1725 CONTRACTS . EFP’S GIVE OUR COMEX LONGS A FIAT BONUS PLUS A DELIVERABLE PRODUCT OVER IN LONDON.  IF WE TAKE THE  OI GAIN AT THE COMEX OF 1343 CONTRACTS TO THE 1725 OI TRANSFERRED TO LONDON THROUGH EFP’S,  WE OBTAIN A STRONG SIZED GAIN OF 3060 OPEN INTEREST CONTRACTS.  THUS IN OUNCES, THE GAIN ON THE TWO EXCHANGES:  13.95 MILLION OZ!!! AND THIS HUGE DEMAND OCCURRED WITH A 7 CENT LOSS IN PRICE .  THE BANKERS ORCHESTRATED THEIR RAID THROUGHOUT LAST WEEK  DESPERATELY TRYING TO PARE THEIR GIGANTIC OPEN INTEREST SHORT ON BOTH EXCHANGES BUT TO NO AVAIL. JUDGING BY THE RECORD NUMBER OF EFP ISSUANCE DURING APRIL AT 385.75 MILLION OZ AND THE CONTINUAL OI GAIN ON THE TWO EXCHANGES, THE CONSTANT RAIDS, (THAT ARE NOW BEING CALLED UPON BY OUR BANKER FRIENDS  IN AN ATTEMPT TO SHAKE AS MANY SILVER LEAVES FROM THE SILVER TREE AS POSSIBLE) AND JUDGING BY THE RESULTS FROM YESTERDAYS ACTION, THEY HAVE NOT BEEN AT ALL SUCCESSFUL.

RESULT: A GOOD SIZED INCREASE IN SILVER OI AT THE COMEX WITH THE 7 CENT LOSS  IN SILVER PRICING YESTERDAY. BUT WE ALSO HAD ANOTHER STRONG SIZED 1725 EFP’S ISSUED TRANSFERRING COMEX LONGS OVER TO LONDON. TOGETHER WITH THE STRONG  SIZED AMOUNT OF SILVER OUNCES STANDING FOR JUNE, DEMAND FOR PHYSICAL SILVER CONTINUES TO INTENSIFY AS WE WITNESS SEVERE BACKWARDATION IN SILVER IN LONDON.

(report Harvey)

.

2.a) The Shanghai and London gold fix report

(Harvey)

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY: Bloomberg

3. ASIAN AFFAIRS

i)FRIDAY MORNING/THURSDAY NIGHT: Shanghai closed DOWN 20.34 points or 0.66%   /Hang Sang CLOSED UP 24.35 points or 0.08%    / The Nikkei closed DOWN 30.47 POINTS OR 0.14% /Australia’s all ordinaires CLOSED DOWN .32%  /Chinese yuan (ONSHORE) closed DOWN at 6.4144/Oil DOWN to 66.66 dollars per barrel for WTI and 77.80 for Brent. Stocks in Europe OPENED ALL GREEN DAX/.  ONSHORE YUAN CLOSED DOWN AT 6.4144 AGAINST THE DOLLAR. OFFSHORE YUAN CLOSED DOWN ON THE DOLLAR AT 6.4077/ONSHORE YUAN TRADING WEAKER AGAINST OFFSHORE YUAN/ONSHORE YUAN TRADING WEAKER AGAINST USA DOLLAR/OFFSHORE YUAN TRADING MUCH WEAKER AGAINST THE DOLLAR /CHINA RETALIATES WITH TARIFFS/ TRUMP RESPONDS TO NEW TARIFFS AND IT NOW LOOKS LIKE A FULL TRADE WAR IS BEGINNING/

/NORTH KOREA/SOUTH KOREA

i)North Korea/South Korea/USA

b) REPORT ON JAPAN

the yen weakens as the Bank of Japan announces a slight taper to their bond purchases.  Basically they are running out of bonds to buy

( zerohedge)

3 c CHINA

A very important read on China.  Luongo believes that China’s next move is to devalue their yuan which will provide much needed help to nations that support China, namely Iran, Venezuela and Turkey in order to keep the supply lines open and full

a must read…

( Tom Luongo)

4. EUROPEAN AFFAIRS

i)SPAIN

Spain celebrates with a new Prime Minister, Sanchez who is the leader of the Socialist opposition party.  Sanchez now becomes Prime Minister after a coalition of hodge podge parties.  They are going to have great difficulty passing anything.  The new leader states that he will call an election before 2020

( zerohedge)

ii)A good commentary on the state of affairs inside Spain and how these guys are going to follow Italy as the populist movement advances.  This is a big problem for Brussels as they cannot allow Spain or Italy or any country to leave the EMU
( Daniel Lacalle/DLacalle.com)

iii)I guess Italy is not fixed as bond yields are rising to their session highs.  The market has just figured out that the new coalition government is more anti establishment than the one Mattarella rejected

( zerohedge)

iv)what a riot!! Italian yields spike

higher on reports that the now ruling coalition is seeking funds to quit the Euro

( zerohedge)

v)Deutsche bank downgraded by S and P

( zerohedge)

vi)Deutsche bank
The real reason for Deutsche bank’s troubles:  they fell for Bernanke’s mantra that the economy was recovering and they went all in on jun bonds etc in the USA.  They are now in serious trouble as their stock indicates
a very important read..
( Jeffrey Snider/Alhambra Investments Partners)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

Turkey

Despite the huge hike in the interest rate, Turkish stocks and the Lira tumble after Erdogan comments seem to indicate that capital controls may be coming forthwith

( zerohedge)

6 .GLOBAL ISSUES

7. OIL ISSUES

8. EMERGING MARKET

BRAZIL

We are witnessing populist pressures are having on various nations, but it is Brazil that is undergoing huge problems with its huge nationwide trucking and other sector strikes.  So far the GDP is down 38% as no commerce is forthcoming.  Now we see that the Petrobas CEO, who is 65 years old (Parente)_ quit unexpectedly. He was the stabilizing force and to see him leave on top of the crippling strike could send Brazil into bankruptcy shortly

(courtesy zerohedge)

9. PHYSICAL MARKETS

i)Chris Marcus writes about the folly of the London Gold Pool which was used to suppress gold prices. Today we are witnessing suppression on a similar scale.  The London Pool scheme lasted 8 years before succumbing.  The author believes that the suppression scheme now will end shortly
( Chris Marcus/GATA)

ii)Mike Kosares pounds the table that for gold ownership you must buy physical and not any of the paper garbage.

( Mike Kosares)

iii)Great commentary from Chris Powell of GATA

( Chris Powell/GATA)

iv)Alasdair Macleod’s latest paper is a must read.  You will recall that it is Macleod’s believe (and myself as well) that China has accumulated 20,000 tonnes to its credit.  It has allowed its citizens to accumulate approximately 18,000 tonnes.  Macleod believes that it is now time for gold to return to real money as China and Russia will finance the next bold infrastructure moves with gold through the use of gold bonds similar to what Britain used to finance the Napoleonic wars.

(a must read..Alasdair Macleod)

v)A great commentary from Nicholas Biezanek as he comes to the conclusion that it is the ESF that is financing these EFP’s/  Is this the end game for the Comex/LBMA and Petro dollar scheme?

a must read…

( Nicholas Biezanek)

10. USA stories which will influence the price of gold/silveri)

i)USA DATA

Official jobs report:

Economy adds 223,000 jobs in May as the unemployment falls to 3.8%

( Needham/the Hill)

ii)Zero hedge:  a good jobs report with a surge of 223,000 workers smashing expectations.  The jobless rate hits a historic low of 3.8% as more souls join the non labour pool. Hourly earnings increased .3% and that caught the eye of investors as they pulled gold/silver down.

( zerohedge)

iii)The real story: a total of 102 million Americans are not in the labour force;

6.1 million official unemployed and 95.9 million folks no longer in the labour force:  total 102 million Americans and of those working a huge  27 million are part timers
( zerohedge)
iv)The jobs report seems like fairy tales:  They supposedly added 904,000 full time jobs but lost 625,000 part time jobs in a month that witnessed a downward draft in all hard data
( zerohedge)

iv b)The jobs report is one big joke.  The number that the BLS gave this morning was 223,000 jobs. It seems that over 100% of this job addition was made up with the fictitious B/D plg. With retail trade in decimation how on earth could this sector we the largest producer of jobs..absolute garbage!!FROM DAVE KRANZLER OF IRD:

v)hard data continues to disappoint.  Strange: we have two national manufacturing reports: Markit and ISM.  Market has continued to show manufacturing dipping each month while the ISM shows manufacturing rising so take your pick as to the correct one:  However prices paid which increases costs to manufacturers hit a 7 yr high on both( zerohedge)

vi)Morning trading after jobs report:
dollar bid higher, banks higher, stocks higher gold down bond yields higher
(courtesy zerohedge)

vii)SWAMP STORIES

Comey is grilled as the Feds are seriously considering charging McCabe in a criminal referral.  The only problem here is who is telling the truth McCabe or Comey

( zerohedge)

Let us head over to the comex:

The total gold comex open interest FELL BY A FAIR SIZED 787  CONTRACTS DOWN to an OI level 459,124 WITH THE FALL IN THE PRICE OF GOLD ($1.60 LOSS/ YESTERDAY’S TRADING).   FOR TWO YEARS STRAIGHT WE HAVE NOTICED THAT ONE WEEK PRIOR TO FIRST DAY NOTICE OF AN ACTIVE DELIVERY MONTH THE COMEX OPEN INTEREST CONTRACTS AND EFP’S NOTICES EXPONENTIALLY INCREASE.   THE CME REPORTS THAT THE BANKERS ISSUED A STRONG SIZED  COMEX TRANSFER THROUGH THE EFP ROUTE AS THESE LONGS RECEIVED A DELIVERABLE LONDON FORWARD TOGETHER WITH A FIAT BONUS., THAT IS 7,889 CONTRACTS WERE ISSUED: FOR  JUNE, 0 CONTRACTS ISSUED,  FOR AUGUST 7889 CONTRACTS AND ZERO FOR ALL OTHER MONTHS:

TOTAL  7,889 CONTRACTS.

THE OBLIGATION STILL RESTS WITH THE BANKERS ON THESE TRANSFERS. ALSO REMEMBER THAT THERE IS NO DOUBT A HUGE DELAY IN THE ISSUANCE OF EFP’S AND IT PROBABLY TAKES AT LEAST  48 HRS AFTER LONGS GIVE UP THEIR COMEX CONTRACTS FOR THEM TO RECEIVE THEIR EFP’S AS THEY ARE NEGOTIATING THIS CONTRACT WITH THE BANKS FOR A FIAT BONUS PLUS THEIR TRANSFER TO A LONDON BASED FORWARD.

ON A NET BASIS IN OPEN INTEREST WE GAINED THE FOLLOWING TODAY ON OUR TWO EXCHANGES: 7094 OI CONTRACTS IN THAT 7,889 LONGS WERE TRANSFERRED AS FORWARDS TO LONDON AND WE LOST 787 COMEX CONTRACTS.

NET GAIN ON THE TWO EXCHANGES: 7094 contracts OR 709,400  OZ OR 22.06 TONNES.

Result: A FAIR SIZED INCREASE IN COMEX OPEN INTEREST WITH THE LOSS IN PRICE /YESTERDAY  (ENDING UP WITH AN LOSS IN PRICE OF $1.60).  THE  TOTAL OPEN INTEREST GAIN ON THE TWO EXCHANGES: AT A STRONG 7094 OI CONTRACTS..

We have now entered the active contract month of JUNE where we LOST 2617 contracts and that leaves us with 7720 contracts  We had 75 notices filed upon yesterday so we lost 2542 contracts or 254,200 additional oz will not stand for delivery at the comex and they morphed into London based forwards.

.JULY saw a LOSS of 8 contracts to stand at 1292.  The next big delivery month after June is August and here the OI ROSE BY 1913 contracts UP to 333,403.

AFTER AUGUST, THE NEXT ACTIVE DELIVERY MONTH IS OCTOBER AND HERE THE OI FELL BY 378 CONTRACTS DOWN TO 10,999 CONTRACTS.

We had 101 notice (s) filed upon today for 10100 oz at the comex  which is surprisingly extremely low for a very active and strong delivery month of June.

FOR COMPARISON:

FOR THE JUNE/2017 CONTRACT INITIALLY 19.95 TONNES STOOD FOR DELIVERY.  AT THE END OF JUNE/2017:  9.176 TONNES STOOD AND THE REST MORPHED INTO LONDON BASED FORWARDS.

THERE IS NO QUESTION THAT THE COMEX DOES NOT HAVE ANY  GOLD TO SATISFY UPON OUR LONGS.

Trading Volumes on the COMEX

PRELIMINARY COMEX VOLUME FOR TODAY: 305,418  contracts

CONFIRMED COMEX VOL. FOR YESTERDAY:  331,526   contracts

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And now for the wild silver comex results.

Total silver OI ROSE BY A STRONG SIZED 1065 CONTRACTS FROM 209,358 UP TO 210,423 (AND CLOSER TO THE NEW RECORD OI FOR SILVER SET APRIL 9.2018/ 243,411 CONTRACTS)  DESPITE THE 7 CENT LOSS IN SILVER PRICING/ YESTERDAY. SINCE WE ARE NOW INTO THE NON  ACTIVE DELIVERY MONTH OF JUNE, WE  WERE  INFORMED THAT WE HAD A STRONG SIZED 1725 EFP CONTRACT ISSUANCE FOR JULY AND ZERO FOR ALL OTHER MONTHS.  THESE EFPS WERE ISSUED TO COMEX LONGS WHO RECEIVED A FIAT BONUS PLUS A DELIVERABLE PRODUCT OVER IN LONDON.  THE TOTAL EFP’S ISSUED: 1725.  ON A NET BASIS WE GAINED 2790 SILVER OPEN INTEREST CONTRACTS AS WE OBTAINED A 1065 CONTRACT GAIN AT THE COMEX COMBINING WITH THE ADDITION OF 1725 OI CONTRACTS NAVIGATING OVER TO LONDON.

NET GAIN  ON THE TWO EXCHANGES:  2790 CONTRACTS

AMOUNT STANDING FOR SILVER AT THE COMEX

We are now in the NON active delivery month of JUNE and here the front month FELL  BY 314 contracts FALLING TO 372 contracts. We had 356 notices filed upon yesterday so we gained 42 contracts or an additional 210,000 oz will stand in this non active delivery month of June AS SOMEBODY IS IN URGENT NEED OF PHYSICAL ON THIS SIDE OF THE POND AND QUEUE JUMPING STARTS IN EARNEST QUITE EARLY.

The next big active delivery month for silver is July and here the OI LOST 1190 contracts DOWN to 139,430.  The next delivery month is August and here we gained an initial 4 contracts. The next active delivery month after August for silver is September and here the OI ROSE by 1926 contracts UP to 36,649

We had 59 notice(s) filed for 295,000 OZ for the JUNE 2018 COMEX contract for silver which is extremely large!!

PLEASE NOTE THE FOLLOWING FOR COMPARISON PURPOSES:

ON MAY 31.2017 WE INITIALLY HAD 396 OPEN INTEREST STAND OR A LARGE 1.98 MILLION OZ 

STOOD FOR METAL.

AT THE CONCLUSION OF JUNE 2017:  4.92 MILLION OZ FINALLY STOOD AS QUEUE JUMPING STARTED IN EARNEST AND IN THE ENSUING YEAR, IT CONTINUED WITH RECKLESS ABANDON INCLUDING WHAT YOU ARE WITNESSING TODAY

INITIAL standings for JUNE/GOLD

JUNE 1/2018.

Gold Ounces
Withdrawals from Dealers Inventory in oz nil oz
Withdrawals from Customer Inventory in oz
nil OZ
Deposits to the Dealer Inventory in oz NIL oz
Deposits to the Customer Inventory, in oz   3603.682

OZ

Delaware

No of oz served (contracts) today
101 notice(s)
 10100 OZ
No of oz to be served (notices)
7619 contracts
(761,900 oz)
Total monthly oz gold served (contracts) so far this month
176 notices
17600 OZ
0.5474 TONNES
Total accumulative withdrawals of gold from the Dealers inventory this month NIL oz
Total accumulative withdrawal of gold from the Customer inventory this month xxx oz
VERY UNUSUAL: SECOND DAY NOTICE AND THE COMEX IS COMATOSE???
 TODAY, WE HAVE  A NO PULSE AT THE GOLD COMEX
we had 0 kilobar transaction/
We had 0 inventory movement at the dealer accounts
total inventory deposit into the dealer accounts:  NIL  oz
total inventory withdrawals out of dealer accounts; nil oz
we had 0 withdrawal out of the customer account:
total customer withdrawals:  NIL oz
we had 0 customer deposit
total customer deposits: nil oz
we had only 1 adjustment(s)
i) Out of Delaware:  1197.559  oz was adjusted out of the customer account and this landed into the dealer account of Delaware.

For JUNE:

Today, 0 notice(s) were issued from JPMorgan dealer account and 79 notices were issued from their client or customer account. The total of all issuance by all participants equates to  101 contract(s) of which 0 notices were stopped (received) by j.P. Morgan dealer and 40 notice(s) was (were) stopped/ Received) by j.P.Morgan customer account.

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To calculate the INITIAL total number of gold ounces standing for the JUNE. contract month, we take the total number of notices filed so far for the month (176) x 100 oz or 17600 oz, to which we add the difference between the open interest for the front month of JUNE. (7720 contracts) minus the number of notices served upon today (101 x 100 oz per contract) equals 778,500 oz, the number of ounces standing in this active month of JUNE (24.214 tonnes)

Thus the INITIAL standings for gold for the JUNE contract month:

No of notices served (176 x 100 oz)  + {(7720)OI for the front month minus the number of notices served upon today (101 x 100 oz )which equals 778,500 oz standing in this  active delivery month of JUNE .

WE LOST 2542 CONTRACTS OR AN ADDITIONAL 254200 OZ BACKED THEIR BAGS AND HEADED OVER TO LONDON THROUGH THE EFP ROUTE.

THERE ARE ONLY 8.2689 TONNES OF REGISTERED GOLD AVAILABLE FOR DELIVERY  WHICH WILL MAKE JUNE AN EXTREMELY INTERESTING MONTH AS WE SEE HOW THIS PLAYS OUT!!!

total registered or dealer gold:  265,846.240 oz or 8.2689 tonnes
total registered and eligible (customer) gold;   9,017,569.272 oz 280.48 tones
THE COMEX IS AGAIN IN STRESS AS ONLY 8.2689 TONNES OF GOLD ARE LEFT TO SERVICE DELIVERIES. THERE IS HARDLY ANY GOLD AT THE COMEX TO SERVE UPON LONGS AND THUS THE REASON FOR THE EFP TRANSFER OVER TO LONDON.

IN THE LAST 18 MONTHS 74 NET TONNES HAS LEFT THE COMEX.

end

And now for silver

AND NOW THE APRIL DELIVERY MONTH

JUNE INITIAL standings/SILVER

JUNE 1/ 2018
Silver Ounces
Withdrawals from Dealers Inventory nil oz
Withdrawals from Customer Inventory
 617,721.500 oz
Delaware
jpm
Deposits to the Dealer Inventory
147,739.900
oz
Brinks
Deposits to the Customer Inventory
 386,980.08
oz
Brinks
No of oz served today (contracts)
59
CONTRACT(S)
(295,000 OZ)
No of oz to be served (notices)
313 contracts
(1,565,000 oz)
Total monthly oz silver served (contracts) 415 contracts

(2,075,000 oz)

Total accumulative withdrawal of silver from the Dealers inventory this month NIL oz
Total accumulative withdrawal of silver from the Customer inventory this month

we had 0 inventory movement at the dealer side of things

total dealer deposits: nil oz

we had 2 deposits into the customer account

i) Into JPMorgan: nil oz

*** JPMorgan for most of 2017 and in 2018 has adding to its inventory almost every single day.

JPMorgan now has 140 million oz of  total silver inventory or 52.3% of all official comex silver. (140 million/268 million)

ii) into Delaware: 1021.65 oz

iii) Into Brinks: 385,958.390 oz

total customer deposits today: 386,980.080 oz

we had 2 withdrawals from the customer account;

i) Out of Delaware:: 1005.800 oz

ii) Out of JPM: 616,715.700

total withdrawals;  617,721.500 oz

we had 0  adjustments/ used for delivery purposes

total dealer silver:  65.669 million

total dealer + customer silver:  270.435 million oz

The total number of notices filed today for the JUNE. contract month is represented by 59 contract(s) FOR 295,000 oz. To calculate the number of silver ounces that will stand for delivery in JUNE., we take the total number of notices filed for the month so far at 415 x 5,000 oz = 2,075,000 oz to which we add the difference between the open interest for the front month of JUNE. (372) and the number of notices served upon today (59 x 5000 oz) equals the number of ounces standing.

.

Thus the INITIAL standings for silver for the JUNE contract month: 415(notices served so far)x 5000 oz + OI for front month of JUNE(372) -number of notices served upon today (59)x 5000 oz equals 3,640,000 oz of silver standing for the JUNE contract month

We gained 42 contracts or an additional 210,000 oz will stand in this non active delivery month of June as somebody was in urgent need of silver.

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ESTIMATED VOLUME FOR TODAY: 71,952 CONTRACTS

CONFIRMED VOLUME FOR YESTERDAY:82,109 CONTRACTS

YESTERDAY’S CONFIRMED VOLUME OF  82,109 CONTRACTS EQUATES TO 410 MILLION OZ  OR 58.6% OF ANNUAL GLOBAL PRODUCTION OF SILVER

COMMODITY LAW SUGGESTS THAT OPEN INTEREST SHOULD NOT BE MORE THAN 3% OF ANNUAL GLOBAL PRODUCTION. THE CROOKS ARE SUPPLYING MASSIVE PAPER TRYING TO KEEP SILVER IN CHECK.

The record level of silver open interest is 234,787 contracts set on April 21./2017 with the price at that day at $18.42
The previous record was 224,540 contracts with the price at that time of $20.44

end

NPV for Sprott 

1. Sprott silver fund (PSLV): NAV FALLS TO -2.36% (JUNE 1/2018)
2. Sprott gold fund (PHYS): premium to NAV FALLS TO -0.44% to NAV (JUNE 1/2018 )
Note: Sprott silver trust back into NEGATIVE territory at -2.36%-/Sprott physical gold trust is back into NEGATIVE/ territory at -0.38%/Central fund of Canada’s is still in jail but being rescued by Sprott.
Sprott WINS hostile 3.1 billion bid to take over Central Fund of Canada

(courtesy Sprott/GATA)

3.SPROTT CEF.A FUND (FORMERLY CENTRAL FUND OF CANADA): NAV FALLS TO -2.22%: NAV 13.43/TRADING 13.11//DISCOUNT 2.33.

END

And now the Gold inventory at the GLD/

JUNE 1/WITH GOLD DOWN $5.10 TODAY, A HUGE 4.42 TONNES OF GOLD WAS WITHDRAWN FROM THE GLD AND THIS WAS USED IN THE RAID TODAY/INVENTORY RESTS AT 847.03 TONNES

MAY 31/WITH GOLD DOWN 1.60/NO CHANGE IN GOLD INVENTORY/INVENTORY REMAINS AT 851.45 TONNES

MAY 30/WITH GOLD UP $2.70: A HUGE DEPOSIT OF 2.95 TONNES INTO THE GLD/INVENTORY REMAINS AT 851.45 TONNES

MAY 29/2018/WITH GOLD DOWN $4.50/ NO CHANGES IN GLD INVENTORY/INVENTORY REMAINS AT 848.50 TONNES

May 25/WITH GOLD UP ON THE WEEK BUT DOWN 80 CENTS TODAY: WE HAD A HUGE 3.54 TONNES OF GOLD WITHDRAWAL FROM THE CROOKED GLD/

MAY 24/WITH GOLD UP $12.40/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 852.04

MAY 22/WITH GOLD UP $1.05/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 852.04 TONNES

MAY 21/WITH GOLD DOWN 50 CENTS/A HUGE CHANGE IN GOLD INVENTORY/A WITHDRAWAL OF 3.24 TONNES FORM GLD INVENTORY/INVENTORY RESTS AT 852.04 TONNES

MAY 18/WITH GOLD UP $1.80/A HUGE CHANGE IN GOLD INVENTORY AT THE GLD/ A DEPOSIT OF 9.11 TONNES INTO GLD INVENTORY/INVENTORY RESTS AT 865.28 TONNES/

GLD WAS ONE MASSIVE FRAUD

May 17/WITH GOLD DOWN $1.75/NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 856.17 TONNES

MAY 16./WITH GOLD UP $1.05: NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 856.17 TONNES

MAY 15/WITH GOLD DOWN $27.35, THE CROOKS WITHDREW 10 TONNES OF GOLD FROM THE GLD WHICH WAS USED IN THE RAID TODAY/INVENTORY RESTS AT 856.17 TONNES

MAY 14/ WITH GOLD DOWN $2.35: A HUGE DEPOSIT OF 4.68 TONNES OF GOLD INTO THE GLD and then a withdrawal of 1.48 tonnes /INVENTORY RESTS AT 866.17

A net gain of 3.2 tonnes of gold.

MAY 11/WITH GOLD DOWN $1.75/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 862.96 TONNES/

MAY 10/WITH GOLD UP $9.60/A WITHDRAWAL OF 1.17 TONNES FROM THE GLD/INVENTORY RESTS AT 862.96 TONNES/SUCH CROOKS

MAY 9/WITH GOLD DOWN $0.55/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 864.13 TONNES

MAY 8/WITH GOLD DOWN $0.10/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 864.13 TONNES

MAY 7/WITH GOLD DOWN $0.55/ANOTHER WITHDRAWAL OF 1.47 TONNES OF GOLD FROM THE GLD/INVENTORY RESTS AT 864.13 TONNES

MAY 4/WITH GOLD UP $2.05/A WITHDRAWAL OF 1.13 TONNES OF GOLD FROM THE GLD/INVENTORY RESTS AT 865.60 TONNES

MAY 3/WITH GOLD UP $7.05/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 866.77 TONNES

MAY 2/WITH GOLD DOWN $1.15/ A HUGE WITHDRAWAL OF 4.43 TONNES FROM THE GLD/INVENTORY RESTS AT 866.77 TONNES

MAY 1/WITH GOLD DOWN $12.15/NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 871.20 TONNES

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JUNE 1/2018/ Inventory rests tonight at 851.45 tonnes

*IN LAST 390 TRADING DAYS: 79.56 NET TONNES HAVE BEEN REMOVED FROM THE GLD
*LAST 340 TRADING DAYS: A NET 76.74 TONNES HAVE NOW BEEN ADDED INTO GLD INVENTORY.

end

Now the SLV Inventory/

JUNE 1/WITH SILVER DOWN 3 CENTS/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY REMAINS AT 322.039 MILLION OZ/

MAY 31/WITH SILVER DOWN 7 CENTS/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY REMAINS AT 322.039 MILLION OZ/

MAY 30/WITH SILVER UP 16 CENTS: A HUGE CHANGE IN SILVER INVENTORY AT THE SLV/ A DEPOSIT OF 2.071 MILLION OZ/INVENTORY RESTS AT 322.039 MILLION OZ/

MAY 29.2018/ NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 319.968 OZ

May 25/INVENTORY LOWERS TO 319.968 AS WE HAD A WITHDRAWAL OF 1.035 MILLION OZ

MAY 24/WITH SILVER UP 27 CENTS/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 321.003 MILLION OZ/

MAY 22/WITH SILVER UP 6 CENTS/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 321.003 MILLION OZ/

MAY 21/ WITH SILVER UP 5 CENTS/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 321.003 MILLION OZ/

MAY 18/WITH SILVER DOWN 5 CENTS  A SMALL CHANGE IN SILVER INVENTORY AT THE SLV/ A WITHDRAWAL OF 942,000 OZ/INVENTORY RESTS AT 321.003 MILLION OZ/

May 17/WITH GOLD UP 6 CENTS/A SMALL CHANGES IN SILVER INVENTORY AT THE SLV: A DEPOSIT OF 471,000 OZ//INVENTORY RESTS AT 321.945 MILLION OZ/

MAY 16./WITH SILVER UP 10 CENTS/A HUGE DEPOSIT OF 1.883 MILLION OZ OF SILVER INTO THE SLV/INVENTORY RESTS AT 321.474 MILLION OZ

MAY 15/WITH SILVER DOWN 33 CENTS, NO CHANGES AT THE SLV; THE CROOKS COULD NOT BORROW ANY SILVER BECAUSE THERE IS NONE: INVENTORY RESTS AT 319.591 MILLION OZ

MAY 14/WITH SILVER DOWN 10 CENTS/A SMALL CHANGES IN SILVER INVENTORY AT THE SLV/ A WITHDRAWAL OF 858,000 FROM THE SLV/INVENTORY RESTS AT 319.591 MILLION OZ/

MAY 11/WITH SILVER DOWN 2 CENTS/THE CROOKS WITHDREW A MONSTROUS 2.824 MILLION OZ FROM THE SLV INVENTORY/INVENTORY RESTS AT 320.439 MILLION OZ/

MAY 10/WITH SILVER UP 22 CENTS/NO CHANGES IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 323.263 MILLION OZ/

MAY 9/WITH SILVER UP 6 CENTS/NO CHANGES IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 323.263 MILLION OZ/

MAY 8/WITH SILVER DOWN 2 CENTS:NO CHANGES IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 323.263 MILLION OZ.

MAY 7/WITH SILVER FLAT: A BIG CHANGE IN SILVER INVENTORY AT THE SLV// A WITHDRAWAL OF 942,000 OZ OF SILVER FROM THE SLV INVENTORY/INVENTORY RESTS AT 323.263 MILLION OZ/

MAY4/WITH SILVER UP 5 CENTS/A BIG CHANGES IN SILVER INVENTORY AT THE SLV/ A DEPOSIT OF 1.224 MILLION OZ/INVENTORY RESTS AT 324.205 MILLION OZ/

MAY 2/WITH SILVER UP 24 CENTS/A HUGE CHANGE IN SILVER INVENTORY AT THE SLV// A DEPOSIT OF 6.082 MILLION OZ INTO THE SLV/INVENTORY RESTS AT 322.981 MILLION OZ/

MAY 1/WITH SILVER DOWN 24 CENTS/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 316.899 MILLION OZ/

JUNE 1/2018:

Inventory 322.039 million oz

end

6 Month MM GOFO 2.13/ and libor 6 month duration 2.47

Indicative gold forward offer rate for a 6 month duration/calculation:

G0FO+ 2.13%

libor 2.47 FOR 6 MONTHS/

GOLD LENDING RATE: .34%

XXXXXXXX

12 Month MM GOFO
+ 2.71%

LIBOR FOR 12 MONTH DURATION: 2.57

GOFO = LIBOR – GOLD LENDING RATE

GOLD LENDING RATE  = +.14

end

And now for a totally useless report, the COT which gives position levels of our major players.

Due to the fact that we have humongous amounts of transfers to EFP’s this report is of absolutely and unequivocally no value

your gold COT

Gold COT Report – Futures
Large Speculators Commercial Total
Long Short Spreading Long Short Long Short
193,652 78,522 52,942 171,361 308,050 417,955 439,514
Change from Prior Reporting Period
3,975 -20,198 -2,664 -31,740 -10,626 -30,429 -33,488
Traders
188 74 73 47 57 268 176
 
Small Speculators  
Long Short Open Interest  
51,427 29,868 469,382  
-3,131 -72 -33,560  
non reportable positions Change from the previous reporting period

our large speculators

those large specs that have been long in gold added 3975 contracts to their long side

those large specs that have been short in gold covered (transferred) a  whopping 20,198 contracts

our commercials

those commercials who have been long in gold pitched (transferred) a monstrous net 31,740 contracts from their long side

those commercials who have been short in gold covered (transferred) a net 10,626 contracts from their short side

our small specs

those small specs who have been long in gold added 3131 contracts to their long side

those small specs who have been short in gold transferred (covered) a net 72 contracts from their short side.

and now for our silver cot

Silver COT Report: Futures
Large Speculators Commercial
Long Short Spreading Long Short
83,066 65,613 16,347 77,447 112,744
5,059 2,831 1,738 931 4,805
Traders
107 53 55 36 36
Small Speculators Open Interest Total
Long Short 207,610 Long Short
30,750 12,906 176,860 194,704
1,634 -12 9,362 7,728 9,374
non reportable positions Positions as of: 167 130

our large speculators

those large specs that have been long silver added 5059 contracts to their long side

those large specs that have been short in silver added 107 contracts to their short side

our commercials

those commercials who have been long in silver added 2831 contracts to their long side

those commercials who have been short  in silver added 53 contracts to their short side

our small specs

those small specs who have been long in in silver added 1634 contracts to their long side

those small specs who have been short in silver covered (transferred) a net 12 contracts from their short side.

end

Major gold/silver trading /commentaries for FRIDAY

GOLDCORE/BLOG/MARK O’BYRNE.

GOLD/SILVER

Get “Positioned In Gold” Now As “You Will Not Have Time To Get Positioned” Later

Get “Positioned In Gold” Now As “You Will Not Have Time To Get Positioned” In Physical Later

Guest post by Dominic Frisby of Money Week

This year’s “gold standard” of gold-related research has just come out.

Conveniently enough – given gold’s “safe haven” reputation – it’s arrived just in time for another major financial market scare, this time in the form of Italy.

Below, I consider some of the most pertinent points…

gold chart

The monetary tide is turning – but how far will it wash out?

Every year, Ronald-Peter Stoeferle and Mark Valek at Incrementum AG, a Liechtenstein-based investment and asset-management company, put together an exhaustive report into the state of gold and gold-related markets. It’s known as In gold we trust.

Last year’s edition was downloaded some 1.7 million times. This year’s, some 230 pages long, arrived in my inbox yesterday and I spent yesterday afternoon flicking through it.

In today’s Money Morning I’d like to share some of the thoughts and charts that caught my eye.

The report argues that we are in the early stages of a new bull market for gold. Several factors underpin this thesis, filed under the theme “monetary turns of the tide”.

First, Incrementum notes that central bank monetary policy is changing. What was quantitative easing (QE) is now quantitative tightening (QT). The equivalent of $14.4trn – an almost unfathomably large number –  has been created by the world’s five largest central banks over the past decade.

But this year they turn from net buyers into net sellers of securities. It has already begun in the US and the euro area will soon follow (although it’ll be interesting to see what the situation in Italy does to that plan).

There has been a “global debt accumulation orgy”. But now interest rates are starting to go up, and “the tide of global liquidity is beginning to go out”.

However, while I agree with Incrementum that there has been a change in gear, I’m just not sure quite how much QE has affected gold. It’s so hard to monitor. Easy money saw gold rise between 2009 and 2011, but gold then fell for five years. Investors went elsewhere.

So a change from QE to QT might help gold – or it might not. It depends on how much QT there is, I guess, and what its consequences prove to be. The same goes for interest rates. Sometimes, gold rises when rates go up (as happened in 1980), but this is not always the case.

I do not see rates rising by that much. Central banks will be well aware of the consequence of higher rates – not least to government debt servicing costs – and will only put them up by the smallest amount possible.

We remain at what seems an eternal stand-off: so far, all of this debt hasn’t mattered. One day it will, but nobody knows when.

On the debt front, the chart (above) in particular stood out for me.

It shows US tax revenues against the S&P 500. Since 2015, US tax revenues declined, even as the S&P has risen.

The US already runs a deficit (ie the government spends more than it collects in taxes each year). Donald Trump is not going to cut spending; if anything he is going to spend more – at least that’s what he has indicated.

Where’s the money going to come from? More debt. And there will pressure to keep the cost of that debt down.

The only way interest rates are going to go up by any significant amount is if some kind of crisis forces them up. It will not happen voluntarily.

On that note, Incrementum also observes that “in the great tug-of-war between inflationary and deflationary forces, inflationary forces have gained the upper hand in the course of the past year”.

That certainly seems to be so, and it will put some upward pressure on rates. If wages go up, and with high employment they might at last, inflation will self-reinforce. Inflation should be good for gold.

Even so, I remain of the view that rates will be suppressed where possible.

King Dollar will one day be de-throned – but not for some time

Incrementum’s second changing tide is in the global monetary order, what it calls “de-dollarisation”.

According to the report, “the creeping loss of the hegemonic status of the US dollar as the senior global reserve currency could have far-reaching consequences for the US. Declining global demand for the US dollar and Treasury bonds could boost domestic US price inflation and drive interest rates up further.”

Gold will see increasing demand as a substitute. To back up this point, Incrementum presents a chart showing central bank gold reserves, which are clearly rising.

gold chart

In the ten years since 2008, central banks have increased their gold reserves by about 3,000 tonnes – or 10%.

However, in the context of the global economy this is drop-in-the-ocean stuff, especially given that it came off deeply oversold levels. Yes, the dollar’s absolute status as the global reserve currency is slowly being chipped away – yuan-denominated oil futures are a recent example.

But the dollar is still the global reserve currency. It is currently rising. It remains the world’s default port-of-call in a panic. This time next year and this time in five or, I dare say, even ten years the dollar will still be the world’s reserve currency. That will not change overnight (though it will change).

Gold and cryptocurrencies – allies or mortal enemies?

Incrementum’s third main theme – and this is what presents the biggest threat, in my view, to US dollar hegemony – is the “technological turn of the tide”.

“Epochal technological change is taking place at a breathtaking pace”, says the report – and I could not agree more. As Paypal founder Peter Thiel once noted, technology, not politics, drives change, and we are in the midst of what I have called the Financial Revolution.

Money is changing. From cryptocurrencies to national currencies to something as trivial as reward points, we are moving into a Hayekian era of multiple currencies. “Gold and cryptocurrencies are friends, not foes,” says Incrementum.

That may or may not be so. Crypto has “stolen” the extremely powerful “anti-fiat” narrative from gold and used it to its great advantage. It may be that crypto makes gold even more anachronistic – it may be that gold eventually becomes the backbone of crypto. The jury is still out.

Overall, Incrementum is more bullish on gold than I am, I’d say.

I think I’ve said something along these lines before: it’s like you’re standing up on the cliff tops looking out to sea. Out on the horizon you can see various economic ships sailing about. They are all carrying cargo which will help a gold bull market – inflation, credit crises, monetary panic, and all the rest of it – but they are not yet sailing into harbour. They will one day, but not yet.

When they do, it may be that they move so quickly you will not have time to get positioned in gold – so you need to get positioned now. But gold’s big day in the sun is still a way off.

One day, Rodders – just not yet.

If you want to take a look at Incrementum’s report – and it is full of excellent research, even if our overall conclusions are not in line – you can do so here.

Courtesy of Money Week

News and Commentary

Gold futures end lower, suffer second straight monthly loss (MarketWatch.com)

Gold flat despite weaker dollar as Italy jitters fade (Reuters.com)

Gold surrenders early gains, weighed down by a modest USD (FXStreet.com)

US Silver Scrap prices fall; Silver Futures climb one percent (ScrapeRegister.com)

Italy set for an anti-establishment government after roiling global markets (CNBC.com)


Source: Bloomberg

Italy could be the next Greece — only much worse (CNBC.com)

Gold ETF Loses Its Luster for Investors For Now (Bloomberg.com)

Gold Vs Beer Price Since 1950 (Mining.com)

Russian January Gold Output at 15.67 t (MiningWeekly.com)

Dublin Needs To Build Upwards to Keep Rents Down (IrishTimes.com)

Should We Buy This Irish Manor? Bonner Asks (BonnerAndPartners.com)

Listen on SoundCloud , Blubrry & iTunesWatch on YouTube below

Gold Prices (LBMA AM)

31 May: USD 1,303.50, GBP 978.54 & EUR 1,113.58 per ounce
30 May: USD 1,298.60, GBP 979.27 & EUR 1,119.26 per ounce
29 May: USD 1,302.05, GBP 983.83 & EUR 1,130.57 per ounce
25 May: USD 1,303.95, GBP 976.53 & EUR 1,113.70 per ounce
24 May: USD 1,296.35, GBP 967.73 & EUR 1,104.88 per ounce
23 May: USD 1,294.00, GBP 967.91 & EUR 1,102.88 per ounce
22 May: USD 1,293.90, GBP 961.24 & EUR 1,095.29 per ounce

Silver Prices (LBMA)

31 May: USD 16.55, GBP 12.42 & EUR 14.17 per ounce
30 May: USD 16.37, GBP 12.33 & EUR 14.08 per ounce
29 May: USD 16.48, GBP 12.43 & EUR 14.26 per ounce
25 May: USD 16.67, GBP 12.49 & EUR 14.24 per ounce
24 May: USD 16.51, GBP 12.32 & EUR 14.09 per ounce
23 May: USD 16.53, GBP 12.38 & EUR 14.11 per ounce
22 May: USD 16.58, GBP 12.32 & EUR 14.04 per ounce


Recent Market Updates

– Consequences of Ignoring Economic Reality Are Dangerous
– Are Gold And Silver Bullion Obsolete In The Crypto Age?
– In Gold we Trust: 3 Important Factors Leading to the “Turning of the Monetary Tides”
– Silver Trading in Tight $1 Range As Pressure Builds For A Breakout
– Gold Back Above $1300 – Trump Cancels Historic Summit – Silver “Ready To Breakout”
– Gold Price Surges To Record In Turkey and Other Emerging Markets as Currencies Collapse
– Gold Rarity and Value Shown In Stunning Gold Visualisations
– Gold Looks A Better Investment Than UK Property
– Gold 2048: The Next 30 Years For Gold
– Beware “Snollygosters” and the Empty Promises of Pathological Politicians
– US 10-Year Surges, Emerging Markets Implode…Where Next for Gold?
– Welsh Gold Being Hyped Due To The Royal Wedding?
– Oil Price Is Going To Keep Rising And Inflation Is Coming

Mark O’Byrne
END

Andrew Maguire’s Kinesis money which is a “bitcoin” but backed 100% by allocated gold and silver is set to go.

it think it would be a great idea to look at this!

please read at:  https://kinesis.money/#/

(Andrew Maguire)

Andrew Maguire

2:57 PM (1 hour ago)
to me

Harvey

Here It is my friend!  https://kinesis.money/#/ Please let everyone know.

Let catch up on Monday if you have time. We have billions in the hopper ready to be allocated on the 1st day of trading. The paper market days are over.

Warm regards

Andy

 END
Chris Marcus writes about the folly of the London Gold Pool which was used to suppress gold prices. Today we are witnessing suppression on a similar scale.  The London Pool scheme lasted 8 years before succumbing.  The author believes that the suppression scheme now will end shortly
(courtesy Chris Marcus/GATA)

Chris Marcus: What the London Gold Pool offers about the current gold market

 Section: 

10:22a ET Thursday, May 31, 2018

Dear Friend of GATA and Gold:

Writing for bullion dealer Miles Franklin, financial analyst Chris Marcus calls attention to a couple of fascinating reports about the London Gold Pool of the 1960s by John Paul Koning. They were published in 2009 at the Mises Institute’s internet site.

The London Gold Pool, an operation by Western central banks that sought to hold the gold price at the $35-per-ounce level set by the Bretton Woods agreement of 1944, required a sustained campaign of public and surreptitious government intervention in the financial markets and foreign relations to facilitate the U.S. government’s reckless inflation of the money supply. The pool lasted eight years before collapsing from France’s withdrawal.

Marcus notes the surreptitious intervention in the gold market by central banks since then, credits GATA for helping to expose it, and writes: “Given the recent actions of China and others that continue to build financial infrastructure to eliminate any dependence on or involvement with the petrodollar system, there’s ample reason to believe that it won’t be too much longer before a nation pulls the cord on the current scheme.”

Marcus’ commentary is headlined “What the London Gold Pool Offers about the Current Gold Market” and it’s posted at Miles Franklin’s internet site here:

https://www.milesfranklin.com/what-the-london-gold-pool-offers-about-the…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

END

Mike Kosares pounds the table that for gold ownership you must buy physical and not any of the paper garbage.

(courtesy Mike Kosares)

Mike Kosares: Gold ownership is a lifestyle decision as much as a portfolio decision

 Section: 

3:39p ET Thursday, May 31, 2018

Dear Friend of GATA and Gold:

Gold ownership, USAGold proprietor Mike Kosares writes today, is as much a lifestyle decision as a portfolio decision, more a matter of preserving wealth than making money.

“Don’t buy the paper pretenders,” Kosares writes, “but the real thing in the form of coins and bullion. To do otherwise is to plug into the financial system you are trying to hedge.”

Kosares’ commentary is headlined “Mphm” and it’s posted at USAGold here:

http://www.usagold.com/publications/NewsViewsJune2018-222.html

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

END

Great commentary from Chris Powell of GATA

(courtesy Chris Powell/GATA)

One of these days, Alice — to the moon!

 Section: 

9:58p ET Thursday, May 31, 2018

Dear Friend of GATA and Gold:

At the opening of GATA’s Gold Rush 21 conference in Dawson City, Yukon Territory, back in August 2005, our friend, South Africa’s “Mister Gold,” the late Peter George, was already tired of the brazenness of gold price suppression

“In the last 10 years,” George said, “the central banks have effectively shown that when there is a real crisis, gold actually goes down — and it’s so blatant, it’s a joke”:

http://www.gata.org/node/20

Five years ago yesterday your secretary/treasurer wrote:

“If the Northern Hemisphere was destroyed in a nuclear war, the Federal Reserve, JPMorganChase, and HSBC would get some brokers to Sydney, Rio de Janeiro, and Johannesburg to sell gold futures massively and drive the price down by at least 5 percent.

“Kitco market analyst Jon Nadler would crawl out from the rubble and opine to the cockroaches that the gold price had fallen because so many gold buyers had been killed, as he always had predicted would happen.

“CPM Group’s Jeff Christian would telephone New Zealand not to worry because he was flying down with reams of gold-colored paper that would work just as well in Wellington as it did in New York as long as nobody asked what was behind it.

“And the World Gold Council would console itself with whatever high-fashion models could be found wearing nose rings in French Polynesia.

“But with London and New York razed, at least we’d be spared more contrived rationalizations about the strange market action from the Financial Times and Wall Street Journal”:

http://www.gata.org/node/11426

As often said by bus driver Ralph Kramden of “The Honeymooners,” played by Jackie Gleason back in the 1950s, “One of these days, Alice — to the moon!”:

https://www.youtube.com/watch?v=98qw86DsdZ0

But, probably, first the scales will have to fall from the eyes of some of our betters in financial market analysis and journalism or they’ll have to grow backbones and acknowledge the obvious.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

END

Alasdair Macleod’s latest paper is a must read.  You will recall that it is Macleod’s believe (and myself as well) that China has accumulated 20,000 tonnes to its credit.  It has allowed its citizens to accumulate approximately 18,000 tonnes.  Macleod believes that it is now time for gold to return to real money as China and Russia will finance the next bold infrastructure moves with gold through the use of gold bonds similar to what Britain used to finance the Napoleonic wars.

(a must read..Alasdair Macleod)

Alasdair Macleod: Gold’s monetary rehabilitation

 Section: 

3:14p ET Thursday, May 31, 2018

Dear Friend of GATA and Gold:

In perhaps his most brilliant essay yet, GoldMoney research chief Alasdair Macleod today notes that the U.S. government’s more aggressive use of economic sanctions is pushing the rest of the world away from the U.S. dollar and toward an Asia- and gold-based monetary system.

Macleod then describes the architecture of such a system likely already being constructed by China, leading to the general demise of fiat money throughout the world.

Macleod’s analysis is headlined “Gold’s Monetary Rehabilitation” and it’s posted at GoldMoney here:

https://www.goldmoney.com/research/goldmoney-insights/gold-s-monetary-re…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

Gold’s Monetary Rehabilitation

There is a quiet revolution taking place in the monetary vacuum that’s developing on the back of the erosion of the dollar’s hegemony. It is perhaps too early to call what’s happening to the dollar the beginning of its demise as the world’s reserve currency, but there is certainly a move away from it in Asia. And every time the Americans deploy their control over global trade settlement as a weapon against the regimes they dislike, nations who are neutral observers take note and consider how to protect themselves, “just in case.”

Vide Europe over the Iran issue. And Turkey. These are rifts in NATO. Countries in Africa, and elsewhere are now taking China’s money. And to please the Chinese, Gambia, Burkina Faso, Panama and the Dominican Republic have all recently severed diplomatic relations with Taiwan. Small fry perhaps, but a weathervane showing which way the wind is blowing.

We’ve seen Russia set up an alternative to SWIFT in order to be free from American monetary interference in pan-Asian trade. We’ve seen China take major steps to exclude the dollar from her trade as much as possible and to enhance the role of her own currency. And now we have a schism over Iran between America and the Europe it set up after WW2 through the mechanism of the CIA-controlled American Committee for United Europe in 1948.

It is unprecedented, and today America obviously cares less for her relationship with European allies than she hates Iran. There can be little doubt that America’s undeclared war against the land of Omar Khayyam is intended to undermine its economy and create the conditions for internal revolution. The Iranian rial has continued its collapse, and the theocratic government has played into US hands by shutting down “unauthorised” money-changers, with Grand Ayatollah Nasser Makarem Shirazi calling for the execution of money changers to help end the currency crisis. The black-market rate for rials has rocketed as a result, and according to Professor Steve Hanke whose department at John Hopkins University makes a study of these things, the true rate of price inflation has jumped to 74.8%.[i]

For the ordinary Iranian, gold has always been the ultimate money, while their government’s rials are to be rapidly passed on to someone else. America’s sanctions and the government’s actions merely reinforce that message. Time will tell whether America’s attempt to undermine Iran’s theocracy succeeds, but history suggests it is unlikely. And at a national level, Iran is driven by American actions into accepting anything but dollars in payment for her oil exports. She would like euros, and given the EU is still trying to sell her capital goods, that makes sense. But no commercial bank dares facilitate payment in any currency under the threat of US sanctions and penalties.

That leaves only three possibilities beyond America’s influence: Chinese yuan, Russian roubles, and gold, all independent from the West’s banking system. It is no wonder the new yuan for oil contract in Shanghai, perhaps with a little help from China’s state-owned banks, has got off to a roaring start. We can all understand the desire to lock in oil prices for future delivery, in this case it is in return for yuan issued by the People’s Bank of China. However, in the future Iran will be able to spend the bulk of her yuan on other raw materials, using a range of yuan futures contracts as a bridge to them from her oil.

Essentially, US sanctions are forcing Iran onto a yuan standard for her foreign trade. Furthermore, China is there to pick up the pieces the West abandons because of American sanctions, driving Iran into an increasing dependency on China. The new Silk Road, the Chinese-built 200kph railway between Tehran and the eastern city of Mashad, as well as other Chinese-led rail projects are opening up Iran in a purely Eurasian context, marginalising American power. Iran’s problem with this, if there is one, is international yuan markets are not yet developed enough to make full use of hedging instruments. But Iran’s demand for sophisticated financial tools, as well as from other nations in Asia turning their backs on America, is bound to hasten their development.

I have written several times in the past about the importance of yuan-denominated deliverable gold futures in this context, and the evidence that the two markets offering these contracts, Hong Kong and Dubai, are cooperating in establishing additional vaulting facilities in China, roping in other gold centres in South-east Asia as well. In the case of gold, where physical delivery measured in tonnes is tight, the Chinese are ensuring as far as possible that deliverable liquidity will be there.

Additionally, last week the London Metal Exchange, owned by the Hong Kong Exchange and Clearing (HKEX), admitted it is considering introducing yuan contracts for base metals as well. We can safely assume that while the HKEX is an independent commercial entity, its strategic objectives are closely aligned with and encouraged by the Chinese government. Not only do the Chinese dominate gold markets in Asia, but last year HKEX successfully introduced regulated precious metal contracts in London. There can be little doubt that HKEX will be an important platform for expanding international markets for the Chinese currency. And at some time in the future, a state like Iran will be able to use not only yuan contracts to sell commodities in order to buy other commodities, but to use them as a stepping-stone to mobilise state-owned gold for payments as well.

Our topic is now moving on to gold being actively used as money instead of fiat currencies. While this point is not yet being considered by Western commentators, we can be sure it is by the forward planners in Asian governments. It’s not for nothing India is trying everything to get hold of its citizens gold. To an extent, gold is already used as money by governments, which is why they are still included in monetary reserves. But they are there as a backstop, the money of last resort, no one’s liability. What we could be seeing with the development of international yuan currency markets is a platform that links the use of gold to trade settlement.

This insight means we must look at both the Chinese and Russian policies on gold in a new light. Assumptions in the markets seem to be that China and Russia only see gold as a dollar hedge, or alternatively their accumulation of gold is either to balance the US’s holding of 8,133 tonnes, or alternatively (if you believe the American’s are lying about their reserves) Chinese and Russian gold is there to be used like a sword of Damocles held over the dollar. It would be wrong to dismiss these theories out of hand, but surely, they miss the point. You don’t carefully plan to become a dominant world power, edging out the Americans and their dollars, without careful forward planning of monetary affairs.

There is irrefutable evidence that China has been planning for a post-dollar world since shortly after her leadership threw in the towel on communism and embraced free markets. The regulations appointing the People’s Bank with sole responsibility for gold and silver date all the way back to 1983, since when we can confidently assume the PBOC has quietly accumulated gold on behalf of the state at prices that varied between $250-500 over a nineteen-year period. We know this, because in 2002 the PBOC then permitted private ownership, setting up the Shanghai Gold Exchange to facilitate physical acquisition. This would only have happened after the state had had a clear run at accumulating sufficient physical gold for its future purposes. And, as the largest gold mining nation for many years by far, with state monopolies in refining domestic production, recycling scrap and refining imported doré, there should be no doubt over her policy towards her accumulation of gold bullion.[ii]

Since 2002, the Chinese government has actively encouraged its nationals to accumulate physical gold and judging by net withdrawals from the Shanghai Gold Exchange vaults, the public possesses roughly 18,000 tonnes from more or less a standing start.[iii] My estimate for state ownership of bullion, based on contemporary prices, an analysis of capital inflows in the 1980s, followed by trade surpluses in the 1990s and before the public were permitted to buy in 2002, is approximately 20,000 tonnes. Even so, that may be not be enough gold bullion owned by the state at current prices to operate a simple gold exchange standard, being the equivalent value of ¥5.22 trillion, compared with currency in circulation of ¥7.15 trillion.[iv] For comparison, when President Roosevelt devalued the dollar to $35 in January 1934, the US Treasury held gold worth $7.44bn at the new price against currency in circulation of $5.72bn. Therefore, if the Chinese government has 20,000 tonnes, and if it is to have the same currency cover as America had on 31 January 1934, at current exchange rates gold would have to be priced at $2,317.

Russia began accumulating gold only more recently and is now aggressively building her official reserves. Whether she has accumulated bullion “off balance sheet” is not known but should not be dismissed. Based on her official reserves at 1,910 tonnes worth RUB5.0 trillion, it does not cover M0 yet (RUB8.44 trillion)[v] but a rise in the gold price to $2,200 will do so, and a gold price of $2,860 would be required to match the Americans in 1934. In fact, for both Russia and China if gold is to have a monetary role it would have to be at a far higher price than it is today.

A scheme for linking currency to gold

Comparing the value of bullion held to the narrowest expression of money is likely to prove insufficient upon which to base a future monetary policy. But, given a good base of monetary gold, it is possible to set up arrangements to discourage redemptions of currency for physical gold when a gold exchange standard is fully implemented[vi]. The suggested arrangement that follows is based on the issuance of irredeemable government bonds with a coupon payable in either gold or currency at the owner’s choice (the gold bond). Furthermore, an issue of this sort could be used to improve government finances at the same time.

By issuing the gold bond at a discount to par, early buyers get an enhanced yield. This rewards them for buying a new instrument which has yet to gain its potential market recognition. The market price of the bond will become linked to the yield on physical gold once the conversion rate is set, with an additional margin for issuer risk. And if currency balances invested in such a bond are rewarded with a yield payable in gold, demand for currency redemptions into gold are unlikely to be significant, so long as the public has confidence in the issue and the gold exchange standard. So, a country putting its currency on a gold exchange standard should, with a correctly priced bond, minimise redemptions.

A sinking fund should be established at the same time as the bond is announced to buy physical gold to cover anticipated demand for coupons paid in gold. Some gold from reserves can be allocated for this purpose initially but additional gold should be bought to establish sufficient cover to add conviction to the scheme by winding down existing foreign currency reserves where they are unbacked by gold, immediately.

From here on, we shall assume this scheme to introduce a sound, gold-exchangeable currency is taken up by the Chinese government. Government finances can be expected to improve from the arrangement, to the extent that borrowing costs are reduced. For example, China’s 30-year bond currently yields 4.1% having been as high as 4.4% earlier this year. A gold-linked irredeemable Chinese bond, even allowing for issuer risk would probably yield no more than 3% at the outset, which is slightly less than the current yield on 1-year maturities. If it was issued with, say, a 2.25% coupon, it would be priced at 75.00, giving the attraction of a capital gain to private citizens as the risk premium on Chinese government bonds declines.

This will also lend support to the currency in the foreign exchanges. The gold bond should be listed in Shanghai, Hong Kong, Tokyo, Singapore, Dubai, London and Moscow so that sovereign wealth funds and other conservative long-term investors have ready access to it. New York is not on the list because it is Chinese policy to exclude the American banking system from her monetary affairs as much as possible, and the conflicts that necessarily would arise with the US government. Ultimately, for funds based outside America, the gold bond itself would come to be regarded as a gold substitute for investment purposes, integrating gold into both Chinese-led monetary and investment reforms.

There can be little doubt that if these measures are taken gold convertibility would rapidly promote the yuan to foreigners in Asia and beyond as an acceptable store of value in exchange for trade. In time, all foreign currency held in China’s monetary reserves not backed by gold would have to be disposed for gold or yuan, as being inconsistent with the new monetary policy. As stated above, China’s gold buying using dollars would start immediately and continue until the price of gold has risen to the point where the gold exchange rate is finally established.

Furthermore, with no final redemption on the gold bond, there would be no need to make any repayment provisions. This model is the one that was adopted by the British government for financing the Napoleonic Wars by issuing Consolidated 3% Annuities at a deep discount, so that investors providing war finance not only got an enhanced yield, but also a substantial capital gain when peacetime returned. The fortunes created on the return to peace played an important part in financing the industrial revolution in the early nineteenth century.[vii]

In this sense, there are good parallels between Britain’s war financing two hundred years ago, and China’s current position. In both cases government expenditure exceeded and exceeds respectively tax income by a significant margin, and neither were and are on a gold standard. Britain had temporarily abandoned her gold standard in the 1790s, before reinstating it a few years after Waterloo.

In China’s case, excess government expenditure is due to planned infrastructure spending, which is likely to be ongoing for at least another ten years and extending well beyond her borders. However, Chinese instigated capital expenditure throughout Asia will increasingly be covered by project financing through the Asian Infrastructure Investment Bank, releasing the Chinese government from much of the financing burden.

The British came out of the Napoleonic Wars with an estimated debt to GDP of about 260%. In cash terms it was considerably less, because the debt figure is the total of nominal debt in issue. This was the beauty of irredeemable Consols, because they never need to be repaid, which meant a more accurate debt to GDP figure was 180%. As an historical footnote, it is interesting they were repaid only recently.

China’s government debt is considerably less at just under 50%, but still rising. China is blessed with a savings rate of close to 50% of GDP as well, so further issues of a gold-linked bond into the domestic market should be heavily subscribed. Once the current expansion of infrastructure spending diminishes, the Chinese government will easily return to a budget surplus, paying down its debt more rapidly than the British did in the 1800s.

I would suggest China undertakes the monetarisation of gold in two stages. The first would be to issue the new gold loan outlined above. Proceeds of the new gold bond would be used to finance government expenditure, to purchase existing bonds in the market for cancellation, and to build a sinking fund to provide cover for future coupon demands in gold. The price relationship between coupons paid in gold and yuan will be fixed at a later date and will be the rate for the gold exchange standard once it is set. It cannot be set at the outset, because it is clear that for gold to be rehabilitated into China’s monetary system, and consequently the likelihood it will be elsewhere, will require a far higher gold price than at present. In price theory, it is the introduction of a new use that will set a higher marginal price. That will be the second step, which is announced in advance when the new gold bond is first issued but at a rate yet to be decided.

China is the ideal jurisdiction for the reintroduction of gold into a monetary system by way of a gold exchange standard. To briefly summarise:

  • China has been secretly accumulating gold since regulations appointed the PBOC to do so in 1983. Not only has the state accumulated significant quantities of gold, but the citizenry has as well. China and its population is therefore fully attuned to the use of gold as money.
  • The Chinese government has no need to resort to the illusory benefits of inflationary financing. Her budget deficits are the consequence of infrastructure spending, which will diminish in time, and her citizens have a savings rate of nearly 50%, which is the real engine behind her economic progress and wealth creation. Furthermore, government debt to GDP is relatively low at about 50%, and she is not burdened by the costs of a Western-style welfare state.
  • China’s success is driven by a political requirement to improve the standards of living for everyone in as many as 42 diverse ethnic groups, representing an unwritten contract between the state and its people in lieu of democracy. A gold standard and a savings vehicle that gives ordinary people a yield on gold will increase personal wealth and guarantee the cohesion and economic strength of the Chinese nation, at a time when America’s finances are relying increasingly on the destruction of private wealth through inflation. There has to be a parting of the ways for the two currencies.
  • The introduction of sound money by way of a gold exchange scheme will ensure China’s economic dominance will develop and continue for a considerable time, much as it did for Britain in the nineteenth century.

Russia is also manoeuvring towards a gold standard, which given her partnership with China at the head of the Shanghai Cooperation Organisation, will most likely build on the Chinese model. The differences are one positive and one negative. The positive is the Russian government’s finances are in excellent order, the negative is Russia has only relatively recently begun to accumulate significant gold reserves. She is therefore likely to want to accumulate more gold before embarking on a gold exchange standard and may therefore encourage China to delay her plans until she is ready.

The consequences of Asian gold exchange standards

The economic cost of a change to sound money is that the transfer of wealth from lender to borrower, which is the dominant feature of unsound money, ceases. Inevitably, overindebted businesses as likely to experience difficulties. Furthermore, Chinese exporters to countries with pure fiat currencies will have to invest in more efficient production to remain competitive.

This is less of a problem than first appears. In her current five-year plan, China is moving away from relying on competitive export models towards developing high-tech and service industries aimed at satisfying a growing middle class. Furthermore, Asia represents a new semi-captive market for China, where the yuan is likely to become the standard foreign currency.

The effect on the dollar, euro and Japanese yen could be ruinous, depending on how the relevant central banks develop their monetary policies. They would have to realise that the era of pure fiat is over, and currencies which depend entirely on confidence in their value are no longer fit for purpose. The PBOC could smoothen this process by giving the other major central banks advance notice of its intentions, to minimise the risk of bullion banks being badly wrong-footed with undeliverable bullion obligations.

In the wider context, financial markets are themselves completely wedded to neo-Keynesian economics and may take some time to adjust to why a successful gold exchange standard is a threat to unbacked fiat currencies. But by providing a globally-acceptable sound-money alternative to the current fiat money system, those that do adapt will avoid the hyperinflations that are the logical destiny for governments that rely on inflationary finance. The eventual prize will be for the Shanghai Cooperation Organisation to have two gold-backed currencies for cross-border trade for use throughout Asia, Eastern Europe, sub-Saharan Africa and parts of South America. The Middle East as well will find these currencies attractive in payment for oil, and countries that stay purely fiat will be marginalised.

Those countries whose currencies have been recently destabilised by the dollar’s rally should be among the first to realise that being tied to a Chinese-led sound money regime is a better option. In the course of only a year or two, in theory over half the world’s population could have access to a currency exchangeable for gold, or at least tied to it.

If the whole scheme of Asian revival through economic power is to progress and survive long into the future, it will be a precondition that gold is central to monetary policy. Indeed, given the increasingly certain fate for the inflationary dollar, which is likely to drag down the rest of the world with it, it should no longer be a matter of choice, only of timing. And unless the welfare-driven nations, whose governments have waxed on the destruction of their citizens’ wealth through deliberate monetary inflation reform their ways, they will deserve to slide into obscurity.

end

A great commentary from Nicholas Biezanek as he comes to the conclusion that it is the ESF that is financing these EFP’s/  Is this the end game for the Comex/LBMA and Petro dollar scheme?

a must read…

(courtesy Nicholas Biezanek)

THE IMMINENT END GAME re COMEX /LBMA /PETRO DOLLAR HEGEMONY

Nicholas Biezanek

I will start with a very relevant quote copied from Jim Willie’s May 2018 Hat Trick Letter.

Many observers do not understand that machines with their complex algorithms use the COMEX contract as a USDollar trading hedge. They do not have to deliver gold. The Fed sees this as a service to enhance the fiat currencies in a hidden support function. It is all part of the sociopath control over a failing system that cannot reform itself’.

The relevance of the above quote has recently been enhanced by the suppression of same day reporting of the two LBMA gold fixes; what we sight now in the West is 100% a COMEX/GLOBEX paper future contract and all transactions involving the eventual delivery of physical gold are totally opaque (opaque is indeed too generous a description, since opaqueness implies some minuscule degree of impaired visibility).Perhaps this iniquitous status quo is about to change .This week the algos, as usual, are working flat out to give the impression that the Italian fiasco means absolutely nothing at all from the perspective of disturbing gold’s extremely limited role in the economic order as dictated by the central planners. Let us examine some recent and evolving events that portend momentous change as paper gold machinations will begin to be overwhelmed by the forthcoming demand for physical delivery of gold. This new daily occurrence of Exchange for Physical contracts inexplicably novated over to the Comex is so egregious as to manifestly portend that the end game is nigh. (A possible explanation is postulated in the body of this paper).

RECENT LBMA VAULT DATA

The LBMA publishes 3 months in arrears the total loco London gold vault holdings. The data as at 28th February 2018 was therefore only released on the morning of 1st June 2018. Why is there a delay of more than 90 days? Even if horse riders are still used to deliver the data returns, loco London implies a very constricted geographic area, so the data should be released within 48 hours if the true intention is to provide meaningful information. The LBMA releases this data under the headline war cry of a move to total transparency, but I believe that this data is complete disinformation, even if accurate. If Deutsche Bank was merely to release the asset side of its balance sheet, how useful would that be in the absence of particulars of all the corresponding liabilities, both on and off balance sheet? The same is true of data in respect of LBMA vault gold. Since all the claims on this gold may be multiples of the physical gold available to meet such claims, then failure to disclose that fact results in merely the dissemination of propaganda, designed to give a false and misleading sense of ‘all is well’. For what it is worth, the table below summarizes loco London vault gold as at 28th February 2018 (the first month of this new LBMA ‘transparency’ was first evidenced in July 2016 and that data is included to assist with contextualization of the figures):

Data from: http://www.lbma.org.uk/london- precious-metals-physical-holdings-statistics
LBMA data is available per month from July 2016 onwards LBMA total loco London gold holdings BOE total vault holdings (included in LBMA data) Residual gold held with all other LBMA custodians Residual gold held with all other LBMA custodians in tonnes GLD holdings with various custodians and sub custodians Non BOE float, excluding GLD custodial gold, avalable for allocated gold holders etc.

A

B

A-B

A-B

C

A-B-C

000

000

000

Troy ozs. Troy ozs. Troy ozs.

Tonnes

Tonnes

Tonnes

July 2016

234,144

158,939

75,205

2,339.14

958.09

1,381.05

Dec 2017

251,622

171,086

80,536

2,504.95

837.05

1,667.90

Jan 2018

251,678

170,979

80,699

2,510.02

841.35

1,668.67

Feb 2018

251,356

169,590

81,766

2,543.21

831.03

1,712.18

The total of EFP contracts for the two months of Jan. and Feb. 2018 was 1,303 tonnes and yet the total of loco London gold holdings has been very constant (as evidenced by the above table). We can draw one very firm conclusion from this data; WHATEVER EFP CONTRACTS (refer below) REPRESENT, ABSOLUTELY NO VAULT GOLD IS LEAVING LOCO LONDON AS A CONSEQUENCE.

THE EXCHANGE FOR PHYSICAL (EFP) FRAUD

Another recent material development (but again shrouded in uber opaqueness) is the metronomic daily ‘transfer’ of Comex positions over to the LBMA under the umbrella term of Exchange for Physical contracts .EFPs were hitherto a seldom used crisis mitigation mechanism, but now every day is apparently a crisis .By this miraculous novation, the Comex open interest is maintained circa 500,000 contracts, but neither the CFTC nor the LBMA are explaining the particulars of the mechanics of these EFPs (perhaps no one outside the Cartel even comprehends the magnitude of the chicanery involved here, but the mandate of credible regulators is not to merely ‘turn a blind eye’ or condone that which they do not understand or indeed that which defies comprehension).Harvey Organ headlines in red a daily warning that these EFPs most probably constitute a massive conspiracy to defraud.

Data from Harvey Organ

Tonnes

Total EFPs in 2018

January

653.22

February

649.45

March

741.89

April

713.84

May

693.80

Total YTD EFPs 2018 (excluding any 2017 data)

3,452.20

Contracts

Comex Equivalent Contracts of above YTD EFPs (A)

1,109,882

Reported Comex Open Interest at 31st May 2018 (B)

459,911

Adjusted true Comex Open Interest but for dilution by EFP manipulative fraud.(A+B)

1,569,793

Total 2016 annual gold production, excluding China and Russia (tonnes)

2,399

Adjusted true Comex Open Position as % of 2016 Annual Gold Production

204%

By extrapolation from the above data, it is evident that by the end of this year, in just twelve months of such transfers, the projected volume of these EFPs will easily exceed 8,000 tonnes , and the total vault gold in loco London not held by BoE and GLD is only 1,712 tonnes. No one seems at all agitated. Here is a possible explanation. Dr. Mark Skidmore and Catherine Austin Fitts have recently brought data to light data that indicates at least $21 trillion (a ‘t’ not a ‘b’) has miraculously vapourized from various USA government coffers. The Exchange Stabilization Fund certainly has the mechanisms to handle clandestinely funds of this magnitude and no one has the authorization to delve into ESF operations or ask any questions. Maybe the ESF is funding the serial purchase/warehousing of Comex contracts to prevent undue expansion of the Comex open interest position. Instead of utilizing the term ESF transfers, someone used the three letters EFP (after all what is the harm of substituting a ‘p’ for an ‘f’ in the grand scheme of events) , and , but for Harvey Organ’s enquiring mind, no one would be any wiser. I am sure that the above postulation is also applicable to the position with silver. If this is indeed the case, then these ‘ESF’ transfers under the guise of ‘EFP’ transfers can continue for an indefinite period. I don’t see what other explanation makes any sense, and hence the COMEX, LBMA, CFTC and all other regulators are relatively relaxed-for the time being at any rate. If I am wrong, I am inclined to say ‘so what’. The ESF would be a relatively benign counter party since it would be disinclined to crash the Comex. If it is any other counter party (and there is a very short list of one? potential candidate given such massive volumes), then ‘watch out below’, because the preservation of the COMEX, one of the most corrupt institutions on the planet, will not be in this entity’s interests for much longer. Only the physical gold market can restore integrity and overwhelm this chicanery. Hurricane storm clouds are looming, which will obliterate the hegemony of paper gold and finally emancipate the precious metals. History may not be kind to the perpetrators of this gargantuan but easily discernible fraud. Indeed the immortal words of Tacitus come to mind; “those, whom the Gods wish to destroy, they first make mad’ .Mankind prospects, mines, refines and hoards 170,000 tonnes of gold over thousands of years and attributes great inherent value to this true form of money but all this legacy is then nullified by a group of corrupt bankers devising a system in which (by virtue of 9 tonnes of ‘disclaimed’ registered gold) the COT and OI will determine its value-this is a true madness. Modern man finds it far easier to attribute value to ‘digital air’, but ironically, in doing so, he has devised this block chain technology that will enable the tracking of the ownership of each and every ounce of gold (kinesis.money is referenced later in this paper and others will follow.)

THE PETROYUAN CONTRACT

On 26th March 2018, after many years of preparation and delays, the first rival to the complete dominance of the petro dollar began operations on the Shanghai Energy Exchange. Although twelve individual monthly forward contracts are quoted, almost all trading action is currently centered on the inaugural and front month contract, the SC1809, with the last SC1809 delivery date on 7th September 2018.Settlement is only effected by delivery of oil. No trader on this exchange is at all interested in USDollars or they would have traded in such in the first place. By its recent uber aggressive, paranoid conduct, the American Administration has indirectly promoted this petro yuan trading facility as if its success was a strategic imperative and certainly Iran, Russia ,Venezuela, Turkey and Syria amongst others will almost certainly now be utilizing the Shanghai Energy Exchange. The trading volumes are recorded below:( this data is for the sc1809 contract only, but this is where all the current trading action is concentrated-It is important to observe note 3 on the monthly data tab which states that all turnover is recorded in Yuan 10,000 units if you visit the site):

Monthly Data on SC1809 contract; last day for delivery on 7th Set,2018 Monthly Turnover (Yuan)
April 2018

533,735,069,200

May 2018

1,764,654,402,200

Total contract YTD

2,298,389,471,400

Whilst the emergence of the petroyuan is never mentioned in Main Stream Media, the figures in the above table above are from inception and achieved in just two months. On 28th May 2018, the value of turnover on the SC1809 contract was Yuan114 billion in a single day. June 2018 has started with Yuan131 billion turnover on the first of the month. These numbers in trillions of yen have to be extremely material in terms of the current global economic order, but the full impact and significance may only be revealed in the coming months; after all, the inaugural SC1809 contract only finally settles in the first week of September 2018 and, whilst the ‘expectations of instant gratification’ in respect of just about any trading development is the norm these days, the petro dollar has dominated and been embedded in the world order into which most people alive today were born. The consequences of trillions of yen being diverted to Shanghai away from trading activity in the petrodollar will have gargantuan consequences, but maybe not today or even tomorrow.

PROBABLE FUTURE DEVELOPMENTS IN THE PHYSICAL GOLD MARKET

I have followed carefully over the last decade the output of about a dozen very knowledgeable commentators on the gold/silver market. I do not believe that an orderly rise in the price of gold to (say) $1,450 per ounce is more probable than a ‘reset’. The charts of the gold price depict the current status quo whereby any imminent and potentially favourable chart development action has been obliterated in nano seconds by the algos dumping billions of dollars of naked short paper contracts That is how it has been for decades and so that is regarded as the norm, the natural order of the universe and observers genuflect to data such as the COT and OI report, because that is what determines the direction of tomorrow’s corrupted paper gold price.. Why would the price of gold be allowed to increase even modestly? Naked short paper gold contracts can be supplied with absolutely no limitation on volume and with total impunity in respect of regulatory intervention. Yes, the open interest on the Comex would explode far beyond the current benchmark of about 500,000 contracts but inordinate increases above this threshold are now being managed on a daily basis by the volume of EFP/ESF transfers (which certainly have nothing to do with physical gold delivery, as proven above).Perhaps this OI benchmark of 500,000 contracts is some kind of threshold agreed with the CFTC to prevent the regulator(s) from manifestly advertising its criminal dereliction of duty in exercising its mandate, although the daily postings of James McShirley in Midas obviate any possible exculpation of the CFTC’s blatant nonperformance against the manifest evidence of manipulation as a predictable and serial way of life. The first week of September 2018 could be an interesting time, with the final settlement date of the inaugural Shanghai petro yuan SC1809 contract coinciding with the reported live inauguration date of the kinesis.money gold backed block chain currency. These petro yuan contracts will thereafter mature serially ever thirty days or so (The SC1810 finally settles on 28thSeptember and the SC1811 finally settles on 7th November 2018 and so on and so on.) The theory is that most of these yuan floating around in Shanghai will eventually seek out a home on the Shanghai gold exchange, where all settlements are effected by the transfer of physical gold only.

Various retail exchanges have available for sale gossamer amounts of bullion coin and this has created a Potemkin type veneer to assist in prolonging the charade that the COMEX/LBMA paper gold price is a true market price. Large wholesale gold/silver purchases (if they occur at all and backwardation indicates extreme tightness) are secretive OTC contracts, hidden from view, with no mechanism at all for public price dissemination. The prognosis is that the demand for large quantities of .9999 finesse gold bars, re-refined to identify any tungsten contamination, (.995 finesse gold bars bearing the baggage of legacy allocated markings are totally unloved) will be occurring in volumes that may at last overwhelm the manipulation of the Western planners. A substantial portion of the existing universal gold hoardings of about 170,000 tonnes will have to be enticed onto the market, but true price discovery will be needed to ascertain the price level for demand/supply equilibrium whereby depreciating fiat currencies are exchanged for the one and only true form of money. The situation could become completely disorderly if the Shanghai Gold Exchange price for physical gold starts to depict a price differential that makes arbitrage with the corrupted LBMA/COMEX paper price attractive. Remember that in the West, the criminal system of fractional reserving means that, at best, there are upwards of 500 (maybe a 1,000) claims on each ounce of physical gold held. Not only will there be these new sources of demand for large quantities of physical gold in the near future but also the situation will be exacerbated by the unravelling of the massive fraud in respect of the re hypothecation (i.e. blatant theft) of most (all?) allocated custodial gold. (The concept of unallocated gold as a credible and robust investment vehicle always was an aberration). In order to capitalize on emerging opportunities for price arbitration, the demand for .9999 finesse gold bars for delivery to Shanghai will gain momentum, but for how long will the telephones be answered at the LBMA etc.? Attempts at any form of novation of paper contracts will encounter derision. Astronomic numbers for the price of an ounce of physical gold are promulgated by some commentators, but no counter party will part with escalating amounts of fiat currency unless both ownership and possession of the related physical gold is assured. The USA is currently seeking to dictate even more aggressively to just about every country on the planet (including now even its (erstwhile?) allies) whilst never being more exposed to the vulnerability embodied by the unbacked and hated fiat US$. The enemies of the USA can easily ‘weaponize” this vulnerability at will. Refer below to comments re USA gold reserves.

COMMENTS ON CENTRAL BANK REPORTED GOLD RESERVES.

As a concluding topic, let us examine the conventional list of the top seven disclosed gold hoardings. There could be a further problem here-‘the gold is gone’; the two countries best prepared for the reset, China and Russia, are the subject of perpetual diplomatic/economic attack by the USA, although the most recent indications are that war with Iran is now the preferred option to distract from the forthcoming reset. It should also be noted that in the last decade, Turkey has increased its reported gold reserves to 565 tonnes.

Location

Tonnes

Comments

USA 8,133? Unaudited since 1953 in respect of a credible audit process-probably dishoarded long ago-the US probably also has a massive deficit in respect of physical gold allegedly held in (‘deep’?) storage for other central banks. Total secrecy is a fundamental and obsessive cornerstone of US gold related policy. Refer GATA’s large advert in WSJ of 31st Jan 2008 entitled “Anybody Seen our Gold?
Germany 3,374 No Comment-some reserves still held externally and are therefore vulnerable/impaired?
IMF 2,814? No-Definitely NIL These purported gold reserves are merely quota allocations from the reserves of the IMF’s founding nations in the ‘forties’ and as such have been double counted since inception and are non-existent. This fact was publicly acknowledged in documents seventy years ago, but is now hushed up, like all inconvenient truths.
Italy 2,452? Italy’s gold reserves were almost certainly impaired at the time of the LTCM crisis. By the Banca d’Italia’s own admission, half of its gold is stored at the Fed as well as additional deposits with BIS, SNB and BoE. It is difficult to place full (indeed any) credibility on stories emanating from Italy.
France 2,436? Of the Banque de France, Milling-Stanley (formerly of the world gold council) said in 2012 ‘it has recently become more active in this space [mobilizing gold into the market], acting primarily as an interface between the Bank for International Settlements in Basel [BIS] and commercial banks requiring dollar liquidity. These commercial banks are primarily located in Europe, especially in France”.’ Mobilization into the market’ almost certainly means the gold is now swapped/leased/loaned. Has the BIS’s demand for gold possibly diminished since 2012 or has every ounce of physical been now commandeered to prolong gold suppression?
China +?1,842 China and all its universe of parastatals and sovereign wealth funds etc. has true gold reserves of many multiples of this reported figure in preparation for the reset. No gold mined in China is ever exported.
Russia +?1,828 The gold reserves stored under the Kremlin are many multiples of the reported figure. Russia is even better prepared for the reset than China. No gold mined in Russia is ever exported.

CONCLUDING COMMENTS

History is being enacted right now. Here is the matrix of historic and unfolding events. The current insanity of this Alice in Wonderland make belief world inspired by the central bank wizards making things up as they go along has been put on notice by the East in its planning for a future millennium, not just the next quarter up to 30th June 2018.China also is facing a galaxy of huge problems but the enormity of all the constructive initiatives embodied in the revival of the historic Silk Road trading bloc is creating a value adding legacy for generations to come, and this brand of forward thinking planners want this new dispensation and economic dawn to be based on sound money.

1944: Bretton Woods Conference The allies agreed on a currency framework whereby the USDollar was the only currency that retained convertibility into gold and thus became ‘the global reserve currency’
1971: Nixon ‘temporarily’ cancels the convertibility of the USDollar into gold bullion. The USDollar consequently became vulnerable to rejection.
1973: Kissinger concluded the petro dollar framework with Saudi Arabia, assuring copious global demand for the USDollar. USDollar hegemony is assured for future decades and hence the USA is thereby enabled to indulge in the creation of infinite trillions in unbacked fiat currency, abandon all forms of fiscal discipline and budgetary restraint, invest unproductively in massive weaponry, engage in perpetual warfare and dictate to the rest of world in microscopic detail as to the manner in which the will of the USA must be fulfilled at all times.
2018: China forges ahead with the One Belt One Road trading/economic framework for the East (and beyond-eventually more than half of the world’s population will be encompassed) and develops mechanisms for rivalling the USA monopolistic global trading and financial infrastructure. The petroyuan trading platform is inaugurated. The USA budget deficit continues to increase annually by two trillion USD and all central banks continue to create fiat currency at will under the banner of quantitative easing. Consequent Inflation and unsustainable asset price bubbles are observed by those ‘with eyes to see’. The constituency of ‘ heretics’ who refuse to genuflect to this new era of central bank indoctrination continues to grow and independent minds even ask “what can possibly go wrong?“ Italy joins Greece in rebellion against austerity and is punished by losing the negative yield on its two year bond. Spain, however retains a negative yield. Pension funds keep very silent but one executive was heard to whisper that negative bond yields ‘suck’. The prognosis is that the petroyuan contract is a precursor to the eventual return to sound money as these petroyuan are converted into gold and gold once again enters the financial system (work in progress). The demise of the petrodollar renders the USDollar exposed to the discipline of market forces; the emancipated East does not like the insanity of what it is observing and dictates a more sane and stable monetary framework (work in progress).Physical gold regains its natural hegemony (a status that it never really lost in China, India and Russia) . The ‘neo cons’ and disciples of American exceptionalism meekly accept this new world order with humility and contrition and express a fervent desire to make substantial reparations for the misery and devastation caused by the 50 year brutal imposition of Pax Americana as USA enters the extended family of the third world???!!! (or is war inevitable?)


___________________________________________________________________

Your early FRIDAY morning currency, Asian stock market results,  important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight/9 AM EST

i) Chinese yuan vs USA dollar/CLOSED DOWN TO 6.4144  /shanghai bourse CLOSED DOWN 20.34 POINTS OR 0.66%     HANG SANG CLOSED UP 24.35  POINTS OR 0.08%
2. Nikkei closed DOWN 30.47 POINTS OR 0.14% /  /USA: YEN RISES TO 109.18/

3. Europe stocks OPENED GREEN  /     /USA dollar index FALLS TO 93.92/Euro RISES TO 1.1709

3b Japan 10 year bond yield: RISES TO . +.05/ !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 109.18/ THIS IS TROUBLESOME AS BANK OF JAPAN IS RUNNING OUT OF BONDS TO BUY./JAPAN 10 YR YIELD FINALLY IN THE POSITIVE/BANK OF JAPAN LOSING CONTROL OF THEIR YIELD CURVE AS THEY PURCHASE ALL BONDS TO GET TO ZERO RATE!!

3c Nikkei now JUST BELOW 17,000

3d USA/Yen rate now well below the important 120 barrier this morning

3e WTI:: 66.66  and Brent: 77.80

3f Gold DOWN/Yen DOWN

3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa./“HELICOPTER MONEY” OFF THE TABLE FOR NOW /REVERSE OPERATION TWIST ON THE BONDS: PURCHASE OF LONG BONDS AND SELLING THE SHORT END

Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.

3h Oil DOWN for WTI and UP FOR Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund RISES TO +.39%/Italian 10 yr bond yield DOWN to 2.55% /SPAIN 10 YR BOND YIELD DOWN TO 1.35%

3j Greek 10 year bond yield FALLS TO : 4.47

3k Gold at $1297.80 silver at:16.43   7 am est) SILVER NEXT RESISTANCE LEVEL AT $18.50

3l USA vs Russian rouble; (Russian rouble UP 26/100 in roubles/dollar) 62.15

3m oil into the 66 dollar handle for WTI and 77 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation. This can spell financial disaster for the rest of the world/

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 109.18 DESTROYING JAPANESE CITIZENS WITH HIGHER FOOD INFLATION

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning 0.9854 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1539 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

3p BRITAIN VOTES AFFIRMATIVE BREXIT/LOWER PARLIAMENT APPROVES BREXIT COMMENCEMENT/ARTICLE 50 COMMENCES MARCH 29/2017

3r the 10 Year German bund now POSITIVE territory with the 10 year RISING to +0.39%

The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”. Next step for Greece will be the recapitalization of the banks and that will be difficult.

4. USA 10 year treasury bond at 2.89% early this morning (THIS IS DEADLY TO ALL MARKETS). Thirty year rate at 3.04%

5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.

(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)

Futures, European Stocks Surge Celebrating New

Spanish, Italian Governments As Payrolls Loom

New Italian government? Check. New Spanish government? Check. Trade war between the US and Europe, Mexico and Canada? Check. Deutsche Bank downgraded to a B-handle? Check.

All these potentially risky events have happened in just the past few hours, yet global stock markets couldn’t care less, and together with US equity futures are a sea of green this morning, heading for a positive end to a volatile, tumultuous week in which political developments in Europe and escalating trade tensions roiled markets, only to get a happy ending, even as the all important payrolls report looms, which is expected to show jobs rising and the unemployment rate holding at the lowest since 2000, suggesting continued tightening by the Fed.

As Bloomberg notes, the (surprisingly) strong positive reaction in European equity markets is the main focus this morning despite the sharp escalation in the global trade dispute. Instead, what traders appear more focused on is the formation of the new Italian government, whose finmin is perceived, perhaps erroneously, as a quasi technocrat despite the clearly Euroskeptic views posted on his blog. For now, however, the Italian FTSE MIB is higher by 2.8%, rallying the most since the end of February and recouping much of its losses for the week as populist parties surged to power, bringing to an end a three-month political deadlock though opening the way to a period of friction with Europe

… while BTPs have rallied in relief at formation of new govt, with the 2Y Italian yield back under 1%…

…. while the Italian-German spread is back to just above 200bps, with Italy’s bank sector rallying heavily.

On Friday, Spain also got a new government when Socialist leader Sanchez becomes PM after lawmakers voted Rajoy out of office. The vote was 180 to 169 with the passing of the vote very much expected. Prior to this Rajoy  accepted his defeat and said that Sanchez is set to be the new PM. Spanish assets rallied after Rajoy’s ouster, opening the way for Socialist leader Pedro Sanchez to take over, and sending 2Y Spanish yields sharply lower.

And yet, as Bloomberg’s Heather Burke notes, despite today’s relief rally, “traders are still bracing for long-term downside, with the cost of bearish versus bullish options based on the index’s three-month 90%/110% skew still near a one-year high.” As a result a return to the 8 1/2-year high for Italian stocks seen in May could prove tough:

Even if an outright euro exit is a low-probability risk, the prospective Italian government could run into tensions with the bloc down the road. Political developments are also still playing out in neighboring Spain, while global trade relations may be souring again. With investors still clearly jittery, there’s plenty of room for risk sentiment to pull back.

Meanwhile, over in Germany as noted earlier, Deutsche Bank stock was unimpressed by the S&P downgrade to BBB+ due to the CEO’s reassuring (repeat) report on liquidity position, with the stock rebounding from yesterday’s all time low…

… even if the CDS is far less convinced that all is well, as DB’s default risk is by far the highest of all major banks.


So as a result of all the various resolutions, even if they were not what one would call “bullish”, the Stoxx Europe 600 index is headed for its biggest gain in a month, led by banks and basic-resources stocks, while S&P equity-index futures pointed to a higher U.S. open.

The risk-on mood prevailed despite President Trump’s launch of tariffs on imports from key trading partners. According to Bloomberg, investors remain optimistic that threats of more international tariffs will not materialize into an all-out trade war between the U.S. and its key partners, while the latest developments in Italy and Spain also removed uncertainty, providing some well-needed relief within Europe

Earlier in the session, Asian stocks traded mixed amid trade war concerns following the US announcement to impose steel and aluminium tariffs on EU, Canada and Mexico, which in turn triggered threats of retaliation against the US. In addition, a slight miss on Chinese Caixin Manufacturing PMI data and looming US NFP jobs data have added to the tentative tone. ASX 200 (-0.4%) was led lower by financials with ANZ Bank pressured on cartel allegation charges related to a share sale in 2015 and as the energy sector also suffered from weakness in crude prices, while Nikkei 225 (+0.1%) shrugged off its opening losses on favourable currency moves. Hang Seng (-0.1%) and Shanghai Comp. (-0.5%) were indecisive and swung between gains and losses as participants digested a range of factors including weaker than expected Caixin Manufacturing PMI data and a firm net liquidity injection of CNY 410bln for the week, as well as the debut of China A-shares in the MSCI Emerging Market benchmark index.

Meanwhile, the TSY curve is marginally steeper as futures edge lower, tracking move in bunds, pushing the 10Y TSY yielld to 2.89% this morning. German bunds led a drop in core European debt as the flight to safety reversed, while peripheral bonds such as Italy’s and Spain’s gained.

Despite the ongoing political risks in the euroarea and the revival of trade-war fears, the currency market was just as blaze as European stocks, and is trading with its familiar pre-payrolls bias, one with relatively low volumes and tight trading ranges:

  • The dollar traded mixed versus Group-of-10 peers as the market entered a consolidation mode ahead of the U.S. data later today and with Scandinavian currencies benefiting from the improvement of market sentiment
  • The euro reversed modest gains made in Asia as Italy prepared to form a populist government while BTPs climbed for the third day, extending a relief rally
  • The yen slid against all G-10 peers and USD/JPY climbed to a high of 109.29 after a brief selloff following a cut in the Bank of Japan’s bond purchases
  • The Aussie declined amid an escalation of global trade tensions after the U.S. slapped metal tariff
  • TRY heavily offered and the Borsa Istanbul 100 Index tumbled after tanking on Thursday by the most in a month, after Turkey’s President Recep Tayyip Erdogan called last night on Turkish citizens to repatriate assets from abroad.

In overnight central bank news, Fed’s Bullard (Non-Voter, Dove) reiterates already at a neutral rate, adds appropriate for Fed to hedge views on rate hikes and that inflation would have surprise to the upside for rate hikes.

As reported yesterday, at the stroke of midnight, US metal tariff exemptions for EU, Canada and Mexico expired overnight which sees US’ closest allies to be subject to 25% tariffs on steel and 10% on aluminium heading into the US. Elsewhere, there were also comments from President Trump that the US will agree to a fair NAFTA deal or no deal at all.

In geopolitics, North Korean leader Kim said their will for denuclearization of the peninsula is unchanged, consistent and fixed, while he hopes that North Korea and US ties will be solved step by step and added North Korea has agreed to a summit with Russia. North and South Korea have agreed to meet on June 14th for military talks.

In commodities, oil is up on the day heading into the weekend with both WTI and Brent up modestly on the day after touching lows in late US trade. This comes after bearish signals in products within the DoE data discounted a wider than expected crude draw. A broader risk averse tone spurred on by trade concerns is dampening prices slightly, however. Gold is lacklustre with the yellow metal essentially flat on the day with traders holding fire ahead of US jobs data. Steel has extended its climb to hit multi-month highs, with aluminium also rising slightly on the day amid the imposition and retaliation of tariffs, as well as continually declining steel stockpiles.

Bulletin Headline Summary from RanSquawk

  • Italian assets seeing significant positivity as government edges closer
  • Spanish PM Rajoy ousted as Socialist Sanchez takes power
  • Looking ahead, highlights include, US NFP, ISM mfg, Baker Hughes and Fed’s Kashkari

Market Snapshot

  • S&P 500 futures up 0.4% to 2,715.50
  • STOXX Europe 600 up 0.9% to 386.40
  • MXAP down 0.01% to 172.15
  • MXAPJ up 0.2% to 563.45
  • Nikkei down 0.1% to 22,171.35
  • Topix up 0.1% to 1,749.17
  • Hang Seng Index up 0.08% to 30,492.91
  • Shanghai Composite down 0.7% to 3,075.14
  • Sensex down 0.08% to 35,294.06
  • Australia S&P/ASX 200 down 0.4% to 5,990.39
  • Kospi up 0.7% to 2,438.96
  • Brent futures up 0.4% to $77.87/bbl
  • Gold spot little changed at $1,299.28
  • U.S. Dollar Index up 0.1% to 94.08
  • German 10Y yield rose 3.4 bps to 0.375%
  • Euro down 0.04% to $1.1688
  • Italian 10Y yield fell 12.0 bps to 2.526%
  • Spanish 10Y yield fell 4.1 bps to 1.462%

Top Overnight News from Bloomberg

  • President Donald Trump on Thursday night warned Canada that any renegotiated North American Free Trade Agreement must be “a fair deal, or there will be no deal at all”
  • EU’s Mogherini: EU will defend its interests; EU response to tariffs will be reasonable and WTO compliant
  • Italy’s populist Five Star Movement and League parties prepared to sweep to power with a program for fiscal expansion that poses a challenge to European rules. Giuseppe Conte, 53, a law professor with no political experience, will be sworn in as prime minister along with his cabinet at 4 p.m. local time on Friday by President Sergio Mattarella
  • U.S.-North Korean talks over a possible summit in Singapore shift to the White House on Friday, where President Donald Trump will host a top aide to Kim Jong Un
  • European May Manufacturing PMIs: Spain 53.4 vs 54.0 est; Italy 52.7 vs 53.0 est; France 54.4 vs 55.1 est; Germany 56.9 vs 56.8 est; Eurozone 55.5 vs 55.5 est; U.K. 54.4 vs 53..5 est.
  • Spain: Rajoy concedes defeat ahead of no-confidence vote in Spanish parliament; says Sanchez will become new PM; later officially confirmed in full vote
  • Deutsche Bank downgraded one notch to BBB+ by S&P; CEO Sewing reaffirms bank’s financial strength is beyond doubt; ECB supervisors see capital and liquidity positions as good, according to people familiar: Reuters
  • BOJ cuts purchases in 5-10y bucket by 20b to 430b yen in regular rinban operation
  • Spanish Prime Minister Mariano Rajoy was ousted by a no- confidence vote on Friday. Socialist leader Pedro Sanchez is due to be sworn in as premier by King Felipe in the coming days.
  • The U.S. has opened a criminal investigation into whether traders manipulated prices in the $550 billion market for corporate bonds issued by Fannie Mae and Freddie Mac, according to people familiar with the matter.
  • The recent volatility in markets has sparked a rebound in trading revenue for global banks, as clients turn their attention to risks such as Italy’s political crisis and step up their hedging, a BNP Paribas SA executive said.
  • U.K. manufacturing growth unexpectedly quickened in May as firms worked through backlogs and built up their inventories; IHS Markit’s PMI for the industry rose to 54.4 in May, up from 53.9 in April and beating economists’ estimates for a drop.

Asian markets traded mixed after trade war concerns resurfaced following the US announcement to impose steel and aluminium tariffs on EU, Canada and Mexico, which in turn triggered threats of retaliation against the US. In addition, a slight miss on Chinese Caixin Manufacturing PMI data and looming US NFP jobs data have added to the tentative tone. ASX 200 (-0.4%) was led lower by financials with ANZ Bank pressured on cartel allegation charges related to a share sale in 2015 and as the energy sector also suffered from weakness in crude prices, while Nikkei 225 (+0.1%) shrugged off its opening losses on favourable currency moves. Hang Seng (-0.1%) and Shanghai Comp. (-0.5%) were indecisive and swung between gains and losses as participants digested a range of factors including weaker than expected Caixin Manufacturing PMI data and a firm net liquidity injection of CNY 410bln for the week, as well as the debut of China A-shares in the MSCI Emerging Market benchmark index. Finally, 10yr JGBs were lower after the BoJ reduced purchases of 5yr-10yr maturities in its Rinban announcement which saw a breakdown of near-term support at 150.94, while price action was also consistent with a recovery in Tokyo stocks and US yields. Chinese Caixin Manufacturing PMI (May) 51.1 vs. Exp. 51.2 (Prev. 51.1). PBoC injected CNY 40bln via 7-day reverse repos, CNY 10bln via 14-day reverse repos and CNY 30bln via 28-day reverse repos, for a net weekly injection of CNY 410bln vs. last week’s CNY 30bln net drain.

Top Asian News

  • China’s Oceanwide Said to Explore Property Sales for Cash
  • Chinese Stocks Decline as MSCI Inclusion Fails to Lift Sentiment
  • Some Turks Fear Culture Clash With Erdogan Is About to Get Worse
  • SoftBank CEO Adds Driverless Tech to 300-Year Plan With GM Deal
  • Singapore’s Biggest Property Broker Is Said to Prepare IPO

European equities bounced back from yesterday’s losses (Eurostoxx 50 +1.1%) with all the major bourses firmly in the green. Italy’s FTSE MIB (+2.8%) is outperforming its counterparts amid a coalition deal revival by the Italian populist parties. As a result, Italian banks are leading the gains with the Italian Bank Index higher by over 5%. Across the continent, Spain’s IBEX (+1.7%) is showing a solid performance while the country’s PM Rajoy accepts his defeat and says opposition Sanchez is set to be the PM. Elsewhere, Deutsche Bank (+3.0%) tries to nurture yesterday’s wounds (shares dropped to record lows after US subsidiaries were added to a federal problem bank list) after ECB sources reassures investors that the bank now has a tighter management team, good liquidity and capital. Finally, Dialog Semiconductors (-14.9%) is the most noticeable mover in the Stoxx 600 after a revenue warning amid tech giant Apple building their own chips.

Top European News

  • U.K. Manufacturing Growth Picks Up in ‘Unconvincing’ Rebound
  • Italy Bonds Gain as Populists Take Power But Skepticism Lingers
  • A $2 Billion Setback Leaves Genmab CEO Undeterred on Pipeline
  • Euro-Area Manufacturing Growth Slows to 15-Month Low in May
  • World Cup Fever Is Coming as Traders Seek Market Mayhem Rescue

In FX, the DXY index is straddling 94.000 ahead of today’s US jobs data amidst relatively narrow bands for most  Dollar/G10 pairings, bar Usd/JPY that has broken above 109.00 and into a firmer trading range amidst a broad improvement in risk sentiment on Italian political grounds over heightened global trade tensions. However, Jpy bears and Greenback bulls may encounter more offers at 109.50 and some technical resistance ahead of the 30 DMA around 109.56. CAD A partial recovery for the Loonie after Thursday’s post-Canadian GDP data dive, with Usd/Cad retreating from circa 1.3000 to sub1.2950, and perhaps acknowledging retaliatory action against US steel and aluminium tariffs rather than dwelling on NAFTA deal prospects that look more remote. AUD Another relative underperformer despite exemptions from the aforementioned US import taxes, with 0.7600 still proving to be a formidable chart hurdle to overcome convincingly and a softer Caixin Chinese manufacturing PMI also undermining the Aud. TRY The Lira is lagging other EMs and not deriving any support from latest CBRT operations, as Usd/Try rebounds back above 4.6000
in wake of a further/faster contraction in Turkey’s manufacturing PMI.

In commodities, oil is up on the day heading into the weekend with both WTI and Brent up modestly on the day after touching lows in late US trade. This comes after bearish signals in products within the DoE data discounted a wider than expected crude draw. A broader risk averse tone spurred on by trade concerns is dampening prices slightly, however. Gold is lacklustre with the yellow metal essentially flat on the day with traders holding fire ahead of US jobs data. Steel has extended its climb to hit multi-month highs, with aluminium also rising slightly on the day amid the imposition and retaliation of tariffs, as well as continually declining steel stockpiles.

Looking at the day ahead, there will be the May employment report due in 1:30pm BST including nonfarm payrolls (190k expected), unemployment rate and the all important average hourly earnings (2.6% yoy expected). The final manufacturing PMI for May, April construction spending and May’s ISM manufacturing prints are also due in the US. Elsewhere, the US automakers’ May sales figures are also due. Finally, US Commerce Secretary Ross is travelling to China this weekend for another round of trade talks

US Event Calendar

  • 8:30am: Change in Nonfarm Payrolls, est. 190,000, prior 164,000
    • Unemployment Rate, est. 3.9%, prior 3.9%
    • Average Hourly Earnings MoM, est. 0.2%, prior 0.1%
    • Average Hourly Earnings YoY, est. 2.6%, prior 2.6%
    • Average Weekly Hours All Employees, est. 34.5, prior 34.5
    • Labor Force Participation Rate, prior 62.8%
  • 9:45am: Markit US Manufacturing PMI, est. 56.6, prior 56.6
  • 10am: Construction Spending MoM, est. 0.8%, prior -1.7%
  • 10am: ISM Manufacturing, est. 58.2, prior 57.3
  • Wards Total Vehicle Sales, est. 16.7m, prior 17.1m

DB’s Jim Reid concludes the overnight wrap

Welcome to June and Happy Birthday to the ECB who is 20 today. The basic conclusion is that the ECB have been able to control bond markets but not equities over this period but who could have foreseen Portuguese bonds out-performing the S&P 500 over the period even though its’ been downgraded from AA to BBB- since the ECB was born. Also this week we have published a ‘best of’ note of all the Italy related charts we’ve published in our annual Long Term Asset Return Studies over the last few years.

So it’s June 1st and I already have more mosquito bites than the hours a BTP trader has worked this week. Every time I go in the garden I get ganged up on by a mossie army and every morning I wake up to discover around 5 fresh overnight attacks. I feel like a walking ‘join-the-dots’ book at the moment. However poor James and Eddie have less ability to swot them away and they have 2 or 3 each on their faces. As I’ve got older I’ve become more and more of a ‘wouldn’t hurt a fly’ type person, however that doesn’t extend to mossies. I want to hurt all of them at the moment.

The news-flow has come so thick and fast this week that an insect swot would have been useful to bash the less useful bits of news away. It hasn’t yet stopped though. Indeed Italy is ending the week by finally managing to form a populist government although the market had moved on somewhat yesterday to the US steel tariffs announcement and the retaliation developments. We also have a vote of no confidence in PM Rajoy today in the Spanish Parliament that he is likely to lose, as per Bloomberg and if that wasn’t enough today sees the US employment report and the monthly PMIs across the globe.

First onto Italy, the former designate PM Mr Giuseppe Conte is expected to be sworn in as the new PM at 4pm local time today, while the respective 5Star (Di Maio) and League leaders (Salvini) will be deputy premiers as well holding other Ministry positions. The key Finance Minister role will go to Giovanni Tria (Head of the Economy Faculty at Rome’s Tor Vergata University), who seems to generally be more pro-Europe as he previously wrote “let’s talk about proposals and let’s find solutions…..rather than using the ‘Brexit’ logic which says that when Europe doesn’t suit you or you don’t like it anymore, you abandon it”.

Notably, the former candidate for the role (Paola Savona) who was vetoed by the President due to concerns that he “might have pushed Italy out of the Euro” will now serve as Minister for European Affairs. These developments might mean that we go back to the slow burning problem of the new administration’s fiscal expansion plans and rolling back of reforms rather than this week’s immediate concerns over a decisive fresh election campaign and possible euro membership discussions. For markets, Italian bonds continued to rally yesterday, with the yields on 2y and 10y BTPs down 60bp and 11bp respectively. As a reminder of the roller coaster ride for 2y BTPs this week, yields initially rallied to as low as 0.25%, before surging back up to an intra-day high of 2.76% less than 2 days later, before settling back down to 0.914% currently to be c45bp higher than Friday’s close.

Parking Italy now for a bit and moving onto tariffs. The US has announced that it will impose tariffs on steel (25%) and aluminium (10%) imports from the EU, Canada and Mexico, effective from today. The move has prompted swift retaliatory measures from its three allies as: i) Canada will impose tariffs on $13bln worth of US imports from 1 July, ii) Mexico will impose proportional tariffs on US farming and industrial products and iii) the EU will take “immediate steps to retaliate” where a proposal in mid-May suggests higher tariffs on $3bln of US imports from June 20. Notably, there seems to be room for negotiations as the US Commerce secretary Ross noted “we continue to be quite willing and eager to have further discussions with all those parties”. Further, the figures mentioned do not appear significant at this stage considering US exports to Canada was $283bn in 2017, although the drag on sentiments and risk of further escalation cannot be ruled out. For now, DB’s Luzzetti believes this latest action is part of a wider ratcheting up of trade confrontations by the US in recent weeks, where the intent likely remains to put additional pressures on US trading partners to extract better terms. It seems the Fed’s Bullard is siding with this view as he noted “… it depends on what is actually agreed upon as far as trade arrangements and I’m not sure that in the end all that much is going to change”.

This morning in Asia, markets are trading mixed with the Nikkei (+0.16%), Kospi (+0.74%) and futures on the S&P (+0.2%) up modestly, while the Hang Seng (-0.17%) and Shanghai Comp. (-0.53%) are both down as we type. Datawise, China’s May Caixin manufacturing PMI was steady mom at 51.1 (vs. 51.2 expected) while the final reading on Japan’s May Nikkei manufacturing PMI nudged up to 52.8 (vs. 52.5 previous). Meanwhile, President Trump has warned Canada that a new NAFTA deal “must be fair or there will be no deal at all”.

Elsewhere, talks between the US Secretary of State Pompeo and top North Korean officials have now wrapped up, with Mr Pompeo indicating real progress had been made towards an “expected” summit between the two leaders. Turning back to yesterday’s markets performance. Core European government bonds initially traded lower following the above market CPI prints (more below), but later firmed as trade tensions resurfaced with the yields on 10y Bunds (-3.2bp), Gilts (-2.9bp) and OATs (-2.9bp) all closing modestly lower. Meanwhile, treasuries fluctuated during the day before ending +0.4bp at 2.859%.

Equities moved in a similar fashion as the tariffs news flowed through markets with the Stoxx 600 reversing earlier gains to close -0.67%. Across the region, the export oriented DAX (-1.40%) led the declines while the Italian market was actually the relative outperformer given the improved political situation (-0.06%). Over in the US, all key bourses weakened (S&P -0.69%; Dow -1.02%; Nasdaq -0.27%) with the consumer staples sector the hardest hit within the S&P, weighed down by Dollar Tree (-14%) and Dollar General (-9%) after the two companies reported softer than expected results and outlook.

In FX, the USD dollar index softened -0.10% and the Euro gained +0.24% to 1.169. Following on, DB’s George Saravelos noted that Italy is too important to be ignored and as a result, the team is lowering their sights on EUR/USD and now expect EUR/USD to remain very choppy, finishing the year around 1.20. Elsewhere, WTI oil largely reversed the prior days gains to close at $67.04/bbl (-1.72%)

Over in Spain, Bloomberg has noted that PM Rajoy may be ousted as the Socialist Party leader Mr Sanchez has sufficient numbers for a no confidence vote today. The situation is still evolving with reports that PM Rajoy will not resign to trigger new elections and could stay on as opposition leader, while Mr Sanchez noted earlier that he plans to call elections “eventually”, but could in theory hold on to power until 2020 with the support of the other parties. So lots bubbling along while we await some clarifications in the coming days.

Before we take a look at today’s calendar and the performance review, we wrap up with the other data releases from yesterday. In the US, the April core PCE was slightly above market at 0.157% mom (vs. 0.1% expected), leading to an in line annual growth of 1.8% yoy. Both the 3- and 6-month annualised rates are running at 2.0%. Meanwhile personal income growth was in line at 0.3% mom while personal spending rose the most in five months (0.6% mom vs. 0.4% expected). Elsewhere, the May Chicago PMI also beat at 62.7 (vs. 58.3 expected) while April pending home sales was weaker than expected at -1.3% mom (vs. 0.4%). Finally, both the weekly initial jobless claims (221k vs. 228k expected) and continuing claims (1,726k vs. 1,733k expected) prints were slightly below expectations. Following the above, the Atlanta Fed’s estimate of Q2 GDP growth was raised by seven tenths to 4.7% saar. Impressive stuff!!

In Europe, the May CPI prints were all above expectations, with the strength partly due to energy and services prices. The Eurozone’s May headline CPI rose to a 13-month high of 1.9% yoy (vs. 1.6% expected) while the core CPI rebounded 0.4ppt mom to 1.1% yoy (vs. 1% expected). Meanwhile, France and Italy’s CPI prints were also above market at 2.3% yoy (vs. 2.1% expected) and 1.1% yoy (vs. 0.9% expected) respectively. Moving to the unemployment readings, the Euro area’s April print edged down 0.1ppt mom to 8.5% (vs. 8.4% expected), while Italy’s print was higher than expected at 11.2% (vs. 10.9%). In the UK, the May GfK consumer confidence index improved 2pts mom to -7 (vs. -8 expected).

Elsewhere, the April mortgage approvals was 62.5k (vs. 63.5k expected) while the net consumer credit was stronger than expected at £1.8bln (vs. £1.3bln). In France, the April PPI fell -0.7% mom (vs. 0.4% previous) leading to an  annual growth of 2.3% yoy.

Looking at the day ahead, in Europe the final manufacturing PMIs are due along with a first look at the non-core and the UK, while in the US there will be the May employment report due in 1:30pm BST including nonfarm payrolls (190k expected), unemployment rate and the all important average hourly earnings (2.6% yoy expected). The final manufacturing PMI for May, April construction spending and May’s ISM manufacturing prints are also due in the US. Elsewhere, the US automakers’ May sales figures are also due. Finally, US Commerce Secretary Ross is travelling to China this weekend for another round of trade talks.

END

3. ASIAN AFFAIRS

i)FRIDAY MORNING/THURSDAY NIGHT: Shanghai closed DOWN 20.34 points or 0.66%   /Hang Sang CLOSED UP 24.35 points or 0.08%    / The Nikkei closed DOWN 30.47 POINTS OR 0.14% /Australia’s all ordinaires CLOSED DOWN .32%  /Chinese yuan (ONSHORE) closed DOWN at 6.4144/Oil DOWN to 66.66 dollars per barrel for WTI and 77.80 for Brent. Stocks in Europe OPENED ALL GREEN DAX/.  ONSHORE YUAN CLOSED DOWN AT 6.4144 AGAINST THE DOLLAR. OFFSHORE YUAN CLOSED DOWN ON THE DOLLAR AT 6.4077/ONSHORE YUAN TRADING WEAKER AGAINST OFFSHORE YUAN/ONSHORE YUAN TRADING WEAKER AGAINST USA DOLLAR/OFFSHORE YUAN TRADING MUCH WEAKER AGAINST THE DOLLAR /CHINA RETALIATES WITH TARIFFS/ TRUMP RESPONDS TO NEW TARIFFS AND IT NOW LOOKS LIKE A FULL TRADE WAR IS BEGINNING/

3 a NORTH KOREA/USA

North Korea/South Korea/usa

3 b JAPAN AFFAIRS

the yen weakens as the Bank of Japan announces a slight taper to their bond purchases.  Basically they are running out of bonds to buy

(courtesy zerohedge)

Japanese Stocks Jump, Yen & Bonds Dump As BoJ Tapers Its Bond-Buying Program

As if the market needed something else to spur volatility, The Bank of Japan chose tonight to cut the size of its purchases of 5-to-10 year JGBs (from 450bn to 430bn yen). Whileyen initially strengthened, it is now tumbling and Japanese stocks absurdly rallying, presumably because yields on the bonds are rising.

So just to clarify – Bank of Japan tapering is causing Treasury selling (10Y +1.5bps), which is pushing the dollar higher, thus sending yen tumbling…

And stocks jumping… Look what you have done Mr Kuroda.

Bloomberg’s Mark Cranfield notes that the BoJ’s timing coincides with the JGB contract trading near the top end of its range for this year, which suggests net market positioning had been skewed long.

As one veteran trader noted: “this would be the perfectly bad timing to cause a JGB VaR shock: just as Italy and Spain get anti-establishment govs, as Trump declares trade war on the world, and as US payrolls looms.”

But on the bright side, he added, “at least we will get some volume in JGB markets tonight.”

Interestingly, some analysts see this as a victory for Kuroda – enabling him to tighten policy (normalize bond-buying further), because while bonds fell after the Bank of Japan’s surprise reduction in debt purchases but the limited reaction in the yen may pave the way for more cuts.

”It’s a victory by the BOJ, given the market consensus is that the bank can’t act as long as there’s wariness over yen appreciation. Yet the yen barely budged” and instead weakened.

Naoya Oshikubo, rates strategist at Barclays Securities Japan, said that while there’s still wariness over yen appreciation, excessive risk aversion related to Italy’s political turmoil appears to have abated, which may have played a part in BOJ’s decision to cut.

end

c) REPORT ON CHINA/HONG KONG

A very important read on China.  Luongo believes that China’s next move is to devalue their yuan which will provide much needed help to nations that support China, namely Iran, Venezuela and Turkey in order to keep the supply lines open and full

a must read…

(courtesy Tom Luongo)

China Holds The Cards In Trump’s Trade War

Authored by Tom Luongo,

The Trump administration continues to play hardball games with China on trade.  The latest news has China angry over Trump going forward with 25% tariffs on an array of Chinese goods after having reached a deal earlier over phone-maker ZTE.

As Bloomberg notes, the announcement by Trump, which seemed to tear up an agreement reached only 10 days ago in Washington, is the latest twist in a trade dispute between the U.S. and China that has rattled financial markets for months and could threaten the broadest global upswing in years, according to the International Monetary Fund.

That said, if Bloomberg is upset about this policy from Trump I’m inclined to be sympathetic.  But, that’s just me being churlish.  Reality is that this kind of behavior only adds fuel to the building devaluation fire building in Beijing.

I discuss whyChina can and should aggressively devalue the Yuan over the next few months to assist its central Asian partners, namely Iran and Turkey, resist aggressive U.S. sanctions policy over at Strategic Culture Foundation:

Secondly, China devalues the Yuan alongside these struggling emerging market countries’ currencies, not to the same degree but enough to still encourage capital inflow into China, to soften the blow and make the Yuan more attractive to procure needed goods in international markets.

And, since Trump doesn’t dare sanction Chinese banks without destroying the U.S. economy, this is just one of the paths available for countries like Turkey, Iran and the EU-27 to circumvent Trump’s aggressive trade war.

China’s moves are bigger than simply the petroyuan.

As I pointed out last week, China is preparing a broad swath of new metals futures contracts through the London Metals Exchange.  This is in addition to the gold futures contract launched last year.

The more alternatives that countries like Turkey, Venezuela and Iran have to keep their supply chains full  the better they can resist the obvious push towards regime change which is what the sanctions are trying to achieve.

These moves are subtle.  They operate below the headlines in the practical world of actual markets, not the avaricious dreams of Certified Crazy People like John Bolton, Mike Pompeo and Nikki Haley.

China’s central bank and its finance ministry are staffed with people who cut their teeth in Western bond and commmodity pits not M.B.A. programs at Ivy League schools.

It’s one of Trump’s real advantages as a President, his real world experience.  But, it’s also one of his failings as well.  He’s never really run a successful deal on people like the Russians and the Persians.  The former see through his nonsense and the latter he hasn’t been allowed to negotiate with because of U.S. policy.

It’s a weakness in that he doesn’t get the cultural imperatives and their sense of history.  They are looking at remaking the world for the next century.  Trump is trying to get through the next election.

*  *  *

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end

4. EUROPEAN AFFAIRS

SPAIN

Spain celebrates with a new Prime Minister, Sanchez who is the leader of the Socialist opposition party.  Sanchez now becomes Prime Minister after a coalition of hodge podge parties.  They are going to have great difficulty passing anything.  The new leader states that he will call an election before 2020

(courtesy zerohedge)

Spanish Prime Minister Rajoy Ousted From

Power; Sanchez Is New Socialist Prime Minister

As was widely expected, this morning Mariano Rajoy’s six year reign as Spain’s prime minister, ended when he become the first prime minister in Spain’s democratic history to be ousted by parliament after losing a vote of no-confidence amid a corruption scandal engulfing his Popular party. He will be replaced by the Socialist opposition leader Pedro Sánchez.

A small but sufficient majority of Spanish lawmakers was sufficient to end Rajoy’s career, voting 180 to 169 to remove the prime minister, cutting short the second term of one of Europe’s longest-serving leaders currently in power. The center-left Socialist Party had called the no-confidence vote last week and proposed its leader to replace Mr. Rajoy.

Rajoy takes his seat at Parliament before the vote of a no confidence motion in Madrid, June 1. Photo: Reuters

Quoted by the FT, in his brief final speech to parliament, Rajoy bade farewell to the country after seven years in power: “It has been an honour to leave Spain better than I found it. Thank you to all Spaniards and good luck.” The speech came after a last meal of sorts:

Mr Rajoy spent eight hours in a Madrid restaurant on Thursday afternoon instead of sitting through the first part of the parliamentary debate, but appeared composed on Friday during his resignation speech.

Socialist Party leader Pedro Sánchez, who becomes prime minister immediately, told lawmakers that his policy goals include bolstering social policies to address problems such as unemployment and poverty levels, both of which remain high despite Spain’s strong growth. Among Sanchez’ challenges will be managing the eurozone’s fourth-largest economy and dealing with internal problems such as the crisis in Catalonia.

The new socialist prime minister will lead a weak minority government with just 84 seats in parliament, part of a coalition that includes a “hodgepodge” of different political parties, including the far-left Podemos group and a string of regional national parties including the Basque Nationalist party and two Catalan nationalist parties; this suggests a tumultuous time is in store for Spain both before and after the upcoming elections.  Indeed, as the WSJ notes,  the new premier’s minority government will struggle to pass legislation and has already promised to call parliamentary elections ahead of the current 2020 deadline.

The leader of the liberal Ciudadanos party, Albert Rivera, labelled this a “Frankenstein government” due to its lack of unifying views. The Catalans want full independence from Spain, for instance.

* * *

Rajoy’s ouster comes just as an antiestablishment government comes to power in Italy, now home to Western Europe’s largest anti-establishment movement, after a three-month power vacuum.

Paradoxically, coming at a time when Europe is supposedly “growing” and following several years of ECB QE meant to stabilize Europe, the two high-profile political crises this week in southern Europe underscore the social and economic scars still borne by the region years after the eurozone’s 2011-12 crisis, damage that is feeding political discontent and stirring hunger for change.

Rajoy had seen his support steadily erode since he became prime minister in 2011 and began to enact a series of painful economic reforms during the eurozone crisis. He has shouldered much of the political blame for a recovery that has left millions of Spaniards behind. He is the first Spanish prime minister to be unseated in a vote of confidence.

That is not to say he didn’t bring it on himself: after numerous lawsuits and years of corruption allegations against Rajoy’s Popular Party came to a head last week when a top Spanish court ruled that his party financially benefited from an illegal kickback scheme. The party has said it would appeal the ruling.  Rajoy hasn’t been charged and denies knowledge of the scheme, however if recent events in other developing nations such as Malaysia are an indication, the public will demand a fall guy, and it may be only a matter of time before Rajoy finds himself behind bars.

For now, however, there is celebration that some order has been restored, with Spain’s Ibex 35 1.8% higher, while Spanish 2Y yield have tumbled to -0.12%, after hugging the unchanged line for much of the past 2 days.

END
A good commentary on the state of affairs inside Spain and how these guys are going to follow Italy as the populist movement advances.  This is a big problem for Brussels as they cannot allow Spain or Italy or any country to leave the EMU
(courtesy Daniel Lacalle/DLacalle.com)

After Italy… Spain Risk Soars

Authored by Daniel Lacalle via DLacalle.com,

Political risk in Europe was largely ignored in international markets because of the mirage of the so-called ‘Macron effect’, the ECB’s massive quantitative easing program, and a perception that everything was different this time in Europe added to the illusion of growth and stability.

However, a storm was brewing and the same old problems seen throughout the years in Europe were increasing.

In Italy, the shock came with an election that brought a coalition of extreme left and extreme right populists. Disillusion with the Euro was evident in Italy for years, as the economy continued to be in stagnation while debt soared. However, international bodies, mainstream analysts, and banks preferred to ignore the risk, instead continuing to announce impossible growth estimates for the following year and science-fiction banks’ profitability improvements.

Italy’s economic problems are self-inflicted, not due to the Euro. Governments of all ideologies have consistently promoted inefficient dinosaur “national champions” and state-owned semi-ministerial corporations at the expense of small and medium enterprises, competitiveness and growth, labor market rigidities created high unemployment, while banks were incentivized to lend to obsolete and indebted state-owned companies in their disastrous empire-building acquisitions, inefficient municipalities, as well as finance bloated local and national government spending. This led to the highest Non-Performing Loan figure in Europe.

Now, the new government wants to solve a problem of high government intervention with more government intervention. The measures outlined would imply an additional deficit of some €130bn by 2020 and shoot the 2020 Deficit/GDP to 8%, according to Fidentiis.

Italy’s large debt and non-performing loans can create a much bigger problem than Greece for the EU. Because this time, the ECB has no tools to manage it. With liquidity at all-time highs and bond yields at all-time lows, there is nothing that can be done from a monetary policy perspective to contain a political crisis.

In Spain, something similar happened.

The Spanish recovery from the worst crisis in decades was impressive and an example for other European countries, but weak and fragile. Spain recovered more than half of the jobs lost during a crisis and slashed deficit by half. Exports rose to 33% of GDP.

However, large imbalances continued to build.

Spain, like Italy, France and Portugal, saw a rising populist wave and, in typical European Union fashion, decided to combat populism by increasing spending and adding public sector imbalances. By doing so, Spain, like Italy, did not stop the populist demands.

However, growth was impressive. In 2018, despite an evident slowdown of the Eurozone, Spain showed a 3% annualized growth in the first quarter. The reason for the difference in performance of Spain relative to other neighboring countries was a very ambitious set of structural reforms. But they came at a cost, as we have seen in many other countries where tough decisions had to be made, and the government lost an absolute majority in the past elections. Now, internal forces put the recovery in danger and threaten the economy again.

The excuse for a vote of no-confidence came from recent corruption cases that have affected the Popular Party, mainly the so-called Gurtel scandal of illegal financing, but any discernable investor knows this is pure political tactic, because the alternative parties are also involved in very relevant corruption cases. All these cases come from the past. From the housing bubble at the beginning of the 2000s (PSOE has the unemployment fraud in Andalucia and the Catalan separatists the embezzlement scandal called “the 3%” because of the bribes requested for public contracts).

The main risk in Spain is very similar to Italy. A weak minority government led by parties that demand massive government spending and more entitlements with larger deficits, could be in power at a crucial time for Spain. When the tailwind of massive liquidity injections and low rates from the ECB ends, Spain will have refinancing requirements that exceed €300 billion per annum before 2022. In 2018, 41.2 billion euro, in 2019, 82.4, in 2020 83.9 and in 2021 58.5 billion euro, with 60.4 billion maturing in 2022.

Italy finds itself in a similar situation, with 84 billion euro maturities in 2018, 161 billion in 2019, 164 billion in 2020 and 172.5 billion euro in 2021.

It is not just a case of sovereign borrowing. The economies, like in 2010-2011, suffer dramatically when borrowing costs rise… And the Credit Default Swap of Italy and Spain have risen dramatically. Spain’s 10-year sovereign bond Credit Default Swap has almost doubled in the five days since the vote of no confidence was announced.

Spain needs to make an adjustment of 15 billion euro in 2018 to meet its commitments with Brussels, and the risk to the economy is that the budget bets the entire deficit reduction on higher tax revenues from stronger growth. That is why markets are so concerned. Spain is a very cyclical economy and the wrong policies can send the country to recession very quickly, as we saw in 2008-2010. However, in 2010 debt was much lower and rates were higher, so there was some fiscal space once the ECB started to lower interest rates… Unfortunately, like Italy, France and Portugal, Spain abandoned its reform agenda to bet it all on monetary policy when the conservative government lost absolute majority.

Now that the tide is turning and the placebo effect of the ECB’s quantitative easing is disappearing, we are seeing a very evident slowdown in the European economy, and Spain’s main trading partners are Eurozone countries, which could damage exports.But we are also witnessing the sudden stop in emerging markets like Brazil or Argentina, and the external sector also depends strongly on exports to these countries.

The likely coalition of Socialists, communists and separatists is aiming to unwind the labor market reform, which is likely to hurt job creation in a country with 15% unemployment where rigid labor laws have made it have an average of 17% unemployment since 1980. Additionally, as we have seen in so many European countries, they want to increase spending massively for entitlements and “relax” deficit targets, i.e. borrow more. The economic programs announced promise up to €60 billion more spending with €47 billion more revenues from raising taxes. The latter will not be achieved, and the former will be overspent, as always.

Like in Italy, the risk is that none of these parties talk of breaking the euro or defaulting now, but most of them have signed in Brussels requests for mechanisms for “orderly exit”. Obviously, with monster debt and massive imbalances, orderly exit is an oxymoron.

The risk of default is currently kept low by the massive quantitative easing of the ECB, but at some point Germany and other countries are going to say “enough is enough”.

Obviously, populists in Spain, like Italy, blame it all on “austerity”. With government spending 13% higher than in 2007, and public spending to GDP at almost 40%, calling the current situation austerity would be a joke if it was not so serious.

Why is there a risk on corporates and the overall economy? In Spain and Italy the real economy is extremely dependent on banks. While in the US banks finance less than 20% of the real economy, in the European Union it is more than 80%. Banks, at the same time, are extremely dependent on sovereign risk. Not just due to their holdings of sovereign bonds, but because of massive lending to local, regional and state administrations. This makes SMEs and families very exposed to sovereign risk.

The main German, French and Spanish banks hold very significant amounts of Italian debt.  Italian banks, €118.76 billion, French ones, €44.27 billion, Spanish financial entities, €28.75 billion and German ones, €24.06 billion.

The Financial systems of Italy, Spain, Portugal and Germany are the largest holders of their countries’ sovereign bonds, at 18%, 13%, 11% and 10% of total assets respectively. Many investors believe that the European Central Bank is going to solve this whole problem monetizing excess deficits and spending. The main problem is that this is the recipe for a Japan-style stagnation process. The central bank cannot print growth.

Analysts ignore the demographics risk in Europe, the excessive spending in entitlements and the constant crowding out of the public sector against the private sector.

The problem in Spain and Italy is not the Euro or the financial markets. It is the continuous, relentless policies of subsidizing the unproductive and the public sector at the expense of the high productivity sectors and taxpayers.

A coalition of socialists, populists and separatists in Spain would not only demolish the reforms that have helped the recovery, it would immediately destroy credit confidence by demanding more wasteful spend and more entitlements while promising a deficit improvement that never arrives through giant tax increases.  These parties want to “recover” the policies that existed before the crisis. The ones that destroyed 3.5 million jobs with the largest stimulus package ever applied in Spain (almost 30% of GDP deficit spending).

The risks in Europe are being underestimated, and the only thing I hear all the time as a bullish argument is “the ECB will monetize it”. Careful what you wish for. The best outcome is a Japan-style stagnation. The worst, back to 2011.

* * *

This was originally published as a Hedgeye Guest Contributor note.

end

I guess Italy is not fixed as bond yields are rising to their session highs.  The market has just figured out that the new coalition government is more anti establishment than the one Mattarella rejected

(courtesy zeorhedge)

Italian Bond Selling Resumes; Yields At Session Highs

end

what a riot!! Italian yields spike

higher on reports that the now ruling coalition is seeking funds to quit the Euro

(courtesy zerohedge)

Italian Yields Spike On Report Italy Ruling Coalition Seeks Funds To Quit Euro

We noted that Italian yields had started to fade wider earlier, but 2Y BTPs are now 50bps higher than the open after headlines that EU lawmakers from the two parties forming Italy’s new government coalition voted this week to set up EU funds to help countries quit the euro.

Reuters reports that the vote came as the anti-establishment 5-Star Movement and far-right League were finalizing a deal to form an executive in Rome, under pledges that leaving the euro was not in their government program.

Despite the declared intentions to stay in the euro, Cyprus Mail details that all six EU lawmakers from the League and all but one of the 14 5-Star Members of the European Parliament voted on Wednesday for a document that called for the establishment of programmes of financial support “for member states that plan to negotiate their exit from the euro.”

The document voted on by their EU lawmakers called for compensation for “the social and economic damages caused by the euro zone membership.”

The document was an amendment to a European Parliament resolution on the EU budget for the 2021-2027 period. The proposal was backed by 90 lawmakers, but was rejected by a majority of the 750 MEPs.

As we noted earlier, this should come as no surprise since, as we explainedthe new coalition government is more anti-establishment than the one Mattarella rejected

And the BTPs that Italy’s FinMin bought yesterday are losing ground fast…

end

Deutsche bank downgraded by S and P

(courtesy zerohedge)

S&P Downgrades Deutsche Bank To BBB+

Adding insult to ruinous injury, just hours after Deutsche Bank stock crashed to all time lows after it was revealed that it had been put on the Fed’s “secret” probation list one year ago, overnight S&P downgraded Deutsche Bank’s credit rating by one notch to BBB+ from A-, just three away from junk, citing “significant execution risks in the delivery of the updated strategy amid a continued unhelpful market backdrop” adding that “relative to peers, Deutsche Bank will remain a negative outlier for some time.”

S&P had initiated the credit review on April 12, shortly after the Christian Sewing was appointed new CEO, replacing John Cryan, saying repeated leadership changes pose questions over its long-term direction, against a background of chronically low profitability.

In its statement (see below), S&P said that “Deutsche Bank’s updated strategy envisages a deeper restructuring of the business model than we previously expected” and that while management is taking “tough actions to cut the cost base
and refocus the business in order to address the bank’s currently weak profitability” the bank “appears set for a period of sustained underperformance compared with peers, many of whom have now finished restructuring.”

The good news is that S&P said the rating outlook is stable, reflecting its view that management will “execute its strategy in earnest and, over time, will show progress against its 2019 financial objectives and so achieve its longer-term objective of a more stable and better-functioning business model.”

To be sure, the bank’s first sub-A rating will likely raise its cost of debt even further, adding to the pressure already suffered by its bonds in the recent selloff and increases the stakes for new CEO Christian Sewing, who replaced John Cryan in April with a mandate to accelerate the bank’s restructuring while refocusing on Deutsche Bank’s European home European market. S&P had initiated its review after Sewing’s appointment, saying repeated leadership changes pose questions over its long-term direction, against a background of chronically low profitability.

Forced to defend itself twice in two days, Sewing, in a letter to staff following the downgrade, said that the bank’s financial strength is “beyond doubt,” though it has to deliver on its strategy “speedily and rigorously.” In the Corporate & Investment Bank “we have a clear strategic direction and we’re well on the way to implementing what we recently announced.”  On Thursday, the bank sent out a similar statement after its stock crashed to all time lows, assuring investors that “Deutsche Bank AG, is very well capitalized and has significant liquidity reserves.

In a separate blow, Bloomberg reported that Deutsche Bank faces cartel charges over its role as underwriter for a A$2.5 billion ($1.9 billion) share sale by Australia & New Zealand Banking Group Ltd. in 2015. Citigroup Inc. also faces the same charges.

Meanwhile, also overnight Reuters reported that the ECB saw Deutsche Bank’s liquidity as being at a good level and the lender has made significant progress regarding its responses to any concerns of the ECB supervisors, Reuters reported, citing an unidentified person familiar with the ECB’s view.

“This is nothing that keeps us awake at night,” Deutsche Bank spokesman Joerg Eigendorf said about the ratings downgrade. “We have refinanced ourselves this year at quite or very good conditions, so that’s not a worry at all for us. And we are able to react if necessary.”

* * *

Looking at the stock reaction, it appears that the downgrade may have been priced in, as DB stock was 3.5% higher this morning trading a €9.48, and rebounding from an all time low hit on Thursday.

Credit traders were less convinced that the worst has passed, with DB CDS jumping as the cost of insuring against a default in Deutsche Bank’s senior debt, jumped to 179 basis points on Friday, from just above 70 at the beginning of the year. By comparison, the spreads for BNP Paribas and Barclays, two of its biggest regional rivals, were 53 and 104 basis points respectively.

The full flow-through of the downgrade remains to be seen, with Goldman arguing in a recent report that losing the A- rating at S&P could cost the bank dearly.

Further counterparty aversion could follow in the event of a downgrade, especially with those clients that have ‘automatic rating triggers’ within their risk policies,” Goldman’s Jernej Omahen wrote. That in turn may hurt Deutsche Bank’s market share further and weaken the company’s ability to generate revenue, the analysts argued according to Bloomberg.

S&P’s downgrade brings its rating more closely into line with that of rivals Moody’s Investor Service. Moody’s long-term senior unsecured debt rating for Deutsche Bank is Baa2. At the time of Sewing’s appointment, Moody’s had affirmed all of its ratings on Deutsche Bank’s debt, but had changed the rating on its A3 deposit and senior debt ratings to negative, from stable.

* * *

FULL TEXT: SEE ZEROHEDGE
END
Deutsche bank
The real reason for Deutsche bank’s troubles:  they fell for Bernanke’s mantra that the economy was recovering and they went all in on jun bonds etc in the USA.  They are now in serious trouble as their stock indicates
a very important read..
(courtesy Jeffrey Snider/Alhambra Investments Partners)

Is Anyone Really Surprised Deutsche Bank’s

Problems Had Nothing To Do With The DoJ Fine

Authored by Jeffrey Snider via Alhambra Investment Partners,

You need only go back a little less than two years for an example. In later 2016, Deutsche Bank was a huge problem everyone was discussing if only because they couldn’t avoid it. Despite “reflation” then gripping much of the world, the German institution stood out for all the wrong reasons.

Those were easily dismissed as nothing other than an impending fine for housing bubble era wrongdoing. The US Department of Justice was going to slam the bank with an enormous penalty and its potential size was supposedly the reason investors were getting nervous. Rumors were swirling that it could be more than $10 billion, perhaps $14 or $15 billion. At that level the bank’s capital stance would be severely threatened (and might trigger coco’s and such).

In January 2017, Deutsche settled for $7.2 billion. It would pay $3.1 billion in civil penalties (under FIRREA) while also covering $4.1 billion in “relief” to various affected parties (such as homeowners). A serious forfeit, but nowhere near as much as had been feared.

After falling below $13 per share (on the NYSE) in September 2016, DB’s stock rose as prospects for a reduced settlement gained in perception. By the time it was announced, the stock had recovered to more than $20. End of story?

Not quite. As I wrote in September 2016:

While attention is rightly focused on Deutsche Bank it is only so because the bank is the most visible symptom being the most vulnerable participant in this “something.” DB is just an outbreak so prominent that the mainstream can no longer pretend there is nothing worth reporting – but they can still obscure why that might be, focusing on the canard about the DOJ settlement. This is a systemic issue, one that is as plain as Deutsche’s stock price.

That’s ultimately what’s important to understand here. The DOJ issue was as residual seasonality, 2a7 money market reform, and everything else. Media attention starts from the premise that everything is good and great, and never deviates from it. Therefore, whenever something comes along that challenges the narrative there is an intense, often desperate search to explain it as something other than it is.

It doesn’t matter if it reaches into the bizarre or absurd, so long as whatever can sound plausible ends up looking benign. DB was in trouble because of long ago transgressions that have nothing to do with its current capabilities and certainly cannot sully the outlook of the awesome future the world’s genius technocrats have laid out for everyone. It always sounds legit, which is the point.

But it is not true. It never is. I’m not claiming Deutsche is the next Lehman, either; they aren’t. That’s the other side to this issue, those who immediately go to the other extreme.

The bank’s struggles are real and they are, in fact, systemic in nature. DB isn’t alone in that regard, but, as I wrote in 2016, they sit at the more visible end of the spectrum. News broke recently that their US operations were secretly placed on a Federal Reserve watchlist. The irony of all this is beyond tragic, since the bank finds itself in this situation because it had followed too closely the overall macro narrative developed by that very central bank.

I wrote a few weeks ago that what got them into so much trouble the last few years was they did what Ben Bernanke and Janet Yellen proposed they do. They believed in the recovery and committed to it.

Recall early 2014. The Fed had already started to taper its final two QE’s and expected that economic risks were shifting in the economy’s favor; so much that central bankers began to think about not just their exit but one fraught by potential overheating. The very thing they talk about today they near shouted about four years ago…

But DB wasn’t just buying junk bonds or leveraged loans and storing them in inventory. They were no investment fund, they were seeking to reclaim at least some part of the past pre-2007 glory. They were going all in on US junk money dealing, the FICC parts that allowed the explosion of leveraged loans all around Houston and beyond.

Today, the bank’s press release contains all the words and reassurances that contrarily conjure up all the wrong sorts of ideas. It says the bank is “very well capitalized” and “has significant liquidity reserves”, the very things you are forced to say when people really start to question your capitalization and liquidity reserves.

Only this time in May 2018 it can’t have anything whatsoever to do with the Department of Justice. Not that it did two years ago, either. It never is what they say. The truth is much simpler, and more depressing. We’ve never recovered from 2008. Some banks learned long ago the full range of what that means, still the hard way, while others are being subjected to the hard lessons of modern credit-based money.

It’s hard to believe now but in May 2007 DB’s stock was trading for more than $150 per share. It did so on the premise that eurodollar banks were valuable franchises (in the 2009 words of Ben Bernanke).

The stock has lost almost 90% of its value over the last eleven years not because of civil fines, money market reform, or Dodd-Frank regulation (or whatever anyone in the mainstream might dream up next to ‘explain’ why it can’t be a broken money system), rather the global system irreparably changed on August 9, 2007.

There are consequences to that for Deutsche Bank still to explore, and those are very much related to those for the global economy as a whole. 

end

8. EMERGING MARKET

BRAZIL

We are witnessing populist pressures are having on various nations, but it is Brazil that is undergoing huge problems with its huge nationwide trucking and other sector strikes.  So far the GDP is down 38% as no commerce is forthcoming.  Now we see that the Petrobas CEO, who is 65 years old (Parente)_ quit unexpectedly. He was the stabilizing force and to see him leave on top of the crippling strike could send Brazil into bankruptcy shortly

\

(courtesy zerohedge)

Petrobras CEO Unexpectedly Resigns Amid Crippling Nationwide Strike, Sending Stock, Real Tumbling

One day after Brazil’s oil workers went on strike, further slowing Latin America’s biggest economy which was already crippled by a trucker strike that has paralyzed the nation for the past 2 weeks, the CEO of the state energy giant, Petrobras, Pedro Parente unexpectedly resigned on Friday stepping down as chief of the state-controlled oil company he helped to revive in the aftermath of the Carwash scandal, as the nationwide strike against high fuel prices has unleashed criticism against his free-market policies.

President Michel Temer and President of Petrobras, Pedro Parente; Source: O Globo

Parente, 65, has become the highest-profile victim of the ongoing truckers strike against fuel prices, now in its 11-th day,  that grounded flights, shuttered sugar mills, caused shortages of products from food to gasoline and is expected to lead to a steep drop in Brazilian GDP. As Bloomberg adds, “his departure marks the downfall of an executive credited with turning around a state-controlled oil company that had been shackled with debt, corruption and mismanagement.”

The news sent Petrobras stock crashing, down 15% on the day…

… wiping out all of the years gains…

… with even the Brazilian Real tumbling on the news and approaching that critical, for Bank of America, Emerging Markets-crisis threshold of 4.00:

That said, it could be worse: those Petrobras 100-Year bonds due in 2115, are now at 87, down from par in January, but well above the lows of 60 cents on the dollar hit in early 2016.

Pointing out the obvious, the President of the Lower House Rodrigo Maia told Bloomberg that “It’s not a good sign that he’s leaving” adding that Pedro Parente “has a lot of credibility and was doing a great job” something traders, suddenly panicking about what is really going on in Brazil, were clearly aware of.

Parente became CEO of Petrobras in May, 2016, vowing to shift company strategy away from government interests and toward a business-oriented strategy. The former engineer was also tasked with cleaning up the image of the company that was at the center of the Brazil’s biggest corruption probe in modern history, Operation Carwash.

As Bloomberg recounts, Parente gained praise in financial markets for plans to sell assets to cut debt, reducing costs, recovering cash flow and implementing a new and profitable fuel price policy. Under Parente’s watch, Petrobras posted its best quarterly financial results in five years, and the company’s stock price doubled.

Ironically, it was exactly that fuel policy, which consisted in matching local fuel prices to international rates, that came under fire during a massive truckers strike that wreaked havoc on Latin America’s largest economy. And, as global oil prices rose this year, the cost of fuel in Brazil also increased, spurring discontent among consumers, led by truck drivers who depend on fuel to make their living.

And so, less than two weeks after the strike which was launched as a result of Parente’s policies, one of Brazil’s most respected capitalists is out, leaving traders with the great unknown of what happens next to one of the world’s export powerhouses.

Meanwhile, as BBVA FX strategist Alejandro Cuadrado notes, it is unclear how the strike will end although as he warns, it would be a troubling sign to see institutions yield further to populist pressures, warning that “concessions or moves to cool short-term noise, maintains medium to long-term risks.”

end

Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings FRIDAY morning 7:00 am

Euro/USA 1.1709 UP .0018/ REACTING TO MERKEL’S FAILED COALITION/ SPAIN VS CATALONIA/REACTING TO +GERMAN ELECTION WHERE ALT RIGHT PARTY ENTERS THE BUNDESTAG/ huge Deutsche bank problems + USA election:///ITALIAN CHAOS /AND NOW ECB TAPERING BOND PURCHASES/JAPAN TAPERING BOND PURCHASES /USA RISING INTEREST RATES /FLOODING/EUROPE BOURSES GREEN 

USA/JAPAN YEN 109.18   UP 0.407  (Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER/

GBP/USA 1.3322 UP  0.0035  (Brexit March 29/ 2017/ARTICLE 50 SIGNED/BREXIT FEES WILL BE CAPPED

USA/CAN 1.2955  UP .0012 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT AND GREXIT FROM EU/(TRUMP INITIATES LUMBER TARIFFS ON CANADA/CANADA HAS A HUGE HOUSEHOLD DEBT/GDP PROBLEM)

Early THIS FRIDAY morning in Europe, the Euro ROSE by 18 basis points, trading now ABOVE the important 1.08 level RISING to 1.1709; / Last night Shanghai composite CLOSED DOWN 20,34 POINTS OR 0.66%  /Hang Sang CLOSED UP 24.25 POINTS OR 0.08% /AUSTRALIA CLOSED DOWN .32% / EUROPEAN BOURSES  ALL GREEN /

The NIKKEI: this FRIDAY morning CLOSED DOWN 30.47 OR 0.14%

Trading from Europe and Asia

1/EUROPE OPENED ALL GREEN 

2/ CHINESE BOURSES / :Hang Sang CLOSED UP 24.35 POINTS OR 0.08%  / SHANGHAI CLOSED DOWN 20,34 POINTS OR 0.66%  /

Australia BOURSE CLOSED DOWN .32%

Nikkei (Japan) CLOSED DOWN 30.47 POINTS OR 0.14%

INDIA’S SENSEX  IN THE RED

Gold very early morning trading: 1297.80

silver:$16.41

Early FRIDAY morning USA 10 year bond yield: 2.89% !!! UP 3 IN POINTS from FRIDAY night in basis points and it is trading WELL ABOVE resistance at 2.27-2.32%. (POLICY FED ERROR)/

The 30 yr bond yield 3.04 UP 1  IN BASIS POINTS from THURSDAY night. (POLICY FED ERROR)/

USA dollar index early  FRIDAY morning: 93.92 DOWN 6  CENT(S) from THURSDAY’s close.

This ends early morning numbers FRIDAY MORNING

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And now your closing FRIDAY NUMBERS \1: 00 PM

Portuguese 10 year bond yield: 1.881% DOWN 10  in basis point(s) yield from THURSDAY/

JAPANESE BOND YIELD: +.048%  UP 8/10   in basis points yield from THURSDAY/JAPAN losing control of its yield curve/

SPANISH 10 YR BOND YIELD: 1.541% DOWN 6  IN basis point yield from THURSDAY/

ITALIAN 10 YR BOND YIELD: 2.690  DOWN 10  POINTS in basis point yield from THURSDAY/

the Italian 10 yr bond yield is trading 115 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: RISES TO +.386%   IN BASIS POINTS ON THE DAY

END

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IMPORTANT CURRENCY CLOSES FOR FRIDAY

Closing currency crosses for FRIDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/1:00 PM

Euro/USA 1.1670 DOWN .0021(Euro DOWN 21 Basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 109.50 UP 0.722 Yen DOWN 72 basis points/

Great Britain/USA 1.3354 UP .0066( POUND UP66 BASIS POINTS)

USA/Canada 1.2959 UP  .0015 Canadian dollar DOWN 15 Basis points AS OIL FELL TO $66.68

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This afternoon, the Euro was DOWN 21 to trade at 1.1670

The Yen FELL to 109.50 for a LOSS of 72 Basis points as NIRP is STILL a big failure for the Japanese central bank/HELICOPTER MONEY IS NOW DELAYED/BANK OF JAPAN NOW WORRIED AS AS THEY ARE RUNNING OUT OF BONDS TO BUY AS BOND YIELDS RISE

The POUND GAINED 66 basis points, trading at 1.3354/

The Canadian dollar LOST  15 basis points to 1.2959/ WITH WTI OIL FALLING TO : $66.68

The USA/Yuan closed AT 6.4204
the 10 yr Japanese bond yield closed at +.048%  UP 8/10  IN BASIS POINTS / yield/
Your closing 10 yr USA bond yield UP 5   IN basis points from THURSDAY at 2.899 % //trading well ABOVE the resistance level of 2.27-2.32%) very problematic USA 30 yr bond yield: 3.046  UP 4      in basis points on the day /

THE RISE IN BOTH THE 10 YR AND THE 30 YR ARE VERY PROBLEMATIC FOR VALUATIONS

Your closing USA dollar index, 94.11  UP 13 CENT(S) ON THE DAY/1.00 PM/

Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for FRIDAY: 1:00 PM PM

London: CLOSED UP 23.53 POINTS OR 0.31%
German Dax :CLOSED UP 119.38 OR 0.95%
Paris Cac CLOSED UP 67.13 POINTS OR 1.24%
Spain IBEX CLOSED UP 166.90 POINTS OR 1.76%

Italian MIB: CLOSED UP 325.37 POINTS OR 1,49%

The Dow closed DOWN 251.94POINTS OR 1.02%

NASDAQ closed UP  620.34 OR .89%4.00 PM EST

WTI Oil price; 66.68  1:00 pm;

Brent Oil: 76.78 1:00 EST

USA /RUSSIAN ROUBLE CROSS: 62.15 DOWN 26/100 ROUBLES/DOLLAR (ROUBLE HIGHER BY 26 BASIS PTS)

TODAY THE GERMAN YIELD RISES TO +.386% FOR THE 10 YR BOND 1.00 PM EST EST

END

This ends the stock indices, oil price, currency crosses and interest rate closes for today 4:30 PM

Closing Price for Oil, 4:30 pm/and 10 year USA interest rate:

WTI CRUDE OIL PRICE 4:30 PM:$65.71

BRENT: $76.58

USA 10 YR BOND YIELD: 2.90% the dropping yields signify markets are in turmoil

USA 30 YR BOND YIELD: 3.05%/

EURO/USA DOLLAR CROSS: 1.1660 down .0031  (down 31 BASIS POINTS)

USA/JAPANESE YEN:109.53 up 0.742 YEN down 74 BASIS POINTS/ .

USA DOLLAR INDEX: 94.20 up 22 cent(s)/dangerous as the HIGHER dollar IS DESTROYING THE EMERGING MARKETS.

The British pound at 5 pm: Great Britain Pound/USA: 1.3348 up 0.0060  (FROM YESTERDAY NIGHT up 60  POINTS)

Canadian dollar: 1.2968 DOWN 24 BASIS pts

German 10 yr bond yield at 5 pm: +386%


VOLATILITY INDEX:  13.46  CLOSED  down 1.97

LIBOR 3 MONTH DURATION: 2.321%  .

And now your more important USA stories which will influence the price of gold/silver

TRADING IN GRAPH FORM FOR THE DAY

US Stocks, Bonds, Dollar Bid After Quitaly Chaos,

Rajoy’s Rout, & Trade War Turmoil

US Bonds Up, US Stocks Up, US Dollar Up… Everything is awesome!

Here’s why:

  • New anti-establishment Italian government? Check.
  • New anti-establishment, socialist Spanish government? Check.
  • Trade war between the US and Europe, Mexico, & Canada? Check.
  • Deutsche Bank (most systemically risky bank in the world at one point) downgraded to a B-handle? Check.
  • Fed Tightening as rate-hike odds rise after good jobs data trumps EU risk? Check.

The holiday-shortened week ended with Nasdaq and Small Caps outperforming, but The Dow lower…

On the day, stocks outperformed post-Trump’s tweet on payrolls, bonds and gold ended lower…

EU banks blodbath’d…

The big US banks ended the week in the red…

Big Tech soared…

This won’t end well…

Another big short-squeeze this week…

Credit markets rallied back from extreme after Italy but remain notably decoupled from equity risks…

Treasury yields all ended lower on the shortened week, with the long-end outperforming…though a massive intra-week range after Italy’s chaos…

The yield curve flattened for the 5th time in six weeks to new 11 year flats…

Oh and ignore this…

The Dollar Index managed to hold on to gains to make it 7 weeks in a row of increases…(though the last two weeks have been very rangebound)

Emerging Markets FX erased last week’s dead cat bounce gains…

Bitcoin, Litecoin, and Ripple ended the week unchanged after some notable volatility but Ethereum and Bitcoin Cash underperformed…

Ugly week for WTI as Copper outperformed…

WTI closed back below $66 for the first time in over 6 weeks…

Gold pushed back below $1300 into today’s close…

And finally, there’s this – probably nothing though…

MARKET DATA/REPORTS

Official jobs report:

Economy adds 223,000 jobs in May as the unemployment falls to 3.8%

(courtesy Needham/the Hill)

Economy adds 223K jobs in May, unemployment down to 3.8 percent

Economy adds 223K jobs in May, unemployment down to 3.8 percent
© Getty Images

The U.S. economy added a robust 223,000 jobs in May, which was better than expected, as the labor market maintained steady growth.

The unemployment rate fell to 3.8 percent, the lowest level since April 2000, and a slight drop from 3.9 percent, the Labor Department reported on Friday.

Job gains were 15,000 more than previously reported in March and April.

During the last three months, jobs added averaged 179,000. Expectations were for a May gain of about 200,000.

The economy, which Trump administration officials say is headed toward a 3 percent pace of growth, grew at a 2.2 percent rate in the January to March quarter, slower than initially reported, the Commerce Department reported on Wednesday.

While the figures were good, President Trump notably tweeted about the jobs report ahead of their release, breaking protocol by sending a signal to markets that the number was solid.

At 7:21 a.m., more than an hour before the 8:30 a.m. release of the jobs numbers, Trump tweeted and said “looking forward to seeing the employment numbers at 8:30 this morning.”

The president gets the jobs numbers ahead of time and is required by a federal rule to refrain from comment for at least an hour after their release to avoid leaking confidential information that can influence stock markets.

Trump has previously violated this rule that bars all executive branch employees, including the president, from making public comments on leading economic indicators before the hour deadline is reached, but Friday was the first time he appeared to reference the numbers prior to their release.

Trump had repeatedly called the job numbers “fake” during the economic recovery under President Obama but has touted the numbers as a significant achievement throughout his time in the White House.

Average hourly pay increased 2.7 percent over the past year, up slightly from last month but still slower than what is typical with such a low unemployment rate.

The job market is also benefiting a wider range of Americans: The unemployment rate for high school graduates reached 3.9 percent, a 17-year low. For black Americans, it reached a record low of 5.9 percent.

But there is growing concern that President Trump’s tariffs on steel and aluminum imports from the nation’s closest allies, including Canada and Mexico, could eventually cost the U.S. millions of jobs.

The president has also threatened China with tariffs on $50 billion in goods and he has instructed the Commerce Department to investigate whether auto imports threaten national security.

Updated at 9:18 a.m.

end

Zero hedge:  a good jobs report with a surge of 223,000 workers smashing expectations.  The jobless rate hits a historic low of 3.8% as more souls join the non labour pool. Hourly earnings increased .3% and that caught the eye of investors as they pulled gold/silver down.

(courtesy zerohedge)

May Jobs Surge By 223,000 Smashing Expectations; Jobless Rate Hits Historic Low As Wages Beat

When we previewed the May payrolls last night we said that “after two consecutive and not immaterial misses, and 6 misses in the past 8 months, it’s about time for a solid payrolls “beat”, even if nobody cares anymore about the number of part-time waiter and bartender jobs created.”

Things got even more interesting this morning when Trump upped the stakes with his tweet that he was “Looking forward to seeing the employment numbers at 8:30 this morning”, strongly hinting that he not only had seen the number, but that it would be a major beat.

Donald J. Trump

@realDonaldTrump

Looking forward to seeing the employment numbers at 8:30 this morning.

Well, perhaps not surprisingly, when the BLS revealed the answer moments ago, it reported that in May the US economy created 223K jobs, smashing expectations of 190K, and indeed confirming that Trump “may have seen been on to something.”

The change in total nonfarm payroll employment for March was revised up from +135,000 to +155,000, and the change for April was revised down from +164,000 to +159,000. With these revisions, employment gains in March and April combined were 15,000 more than previously reported.

At the same time, the US unemployment rate dropped again, sliding to 3.8%, matching the lowest print hit back in April 2000, and the lowest going back all the way to November 1969. In fact, unrounded the unemployment rate was 3.755%, suggesting we were 0.01% away from a 3.7% print.

Looking at the labor force, the participation rate dropped a tad to 62.7% as a result of a labor force which was unchanged on the month, while the number of employed rose from 155,181 to 155,474. Meanwhile, the number of people not in the labor force hit a new all time high of 95.915 million.

But Trump leak rumors aside, the most important number in today’s report was the Average Hourly Earnings, which rose by 0.3% M/M, beating the 0.2% consensus, and up 2.7% Y/Y, also above the expected 2.6%, suggesting that wage gains may once again be on the table, and confirming that not only is a June rate hike guaranteed, but that there will be little to derail the Fed’s tightening plans for a considerable period of time.

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.5 hours in May. In manufacturing, the workweek decreased by 0.2 hour to 40.8 hours, and overtime edged down by 0.2 hour to 3.5 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls remained at 33.8 hours.

Meanwhile, average weekly earnings also beat, rising by 3.0% in May, up from 2.9%, and in line with the highest weekly increases since the financial crisis.

Some more details from the report:

Total nonfarm payroll employment increased by 223,000 in May, compared with an average monthly gain of 191,000 over the prior 12 months. Over the month, employment continued to trend up in several industries, including retail trade, health care, and construction.

In May, retail trade added 31,000 jobs, with gains occurring in general merchandise stores (+13,000) and in building material and garden supply stores (+6,000). Over the year, retail trade has added 125,000 jobs.

Employment in health care rose by 29,000 in May, about in line with the average monthly gain over the prior 12 months. Ambulatory health care services added 18,000 jobs over the month, and employment in hospitals continued to trend up (+6,000).

Employment in construction continued on an upward trend in May (+25,000) and has risen by 286,000 over the past 12 months. Within the industry, nonresidential specialty trade contractors added 15,000 jobs over the month.

Employment in professional and technical services continued to trend up in May (+23,000) and has risen by 206,000 over the year.

Transportation and warehousing added 19,000 jobs over the month and 156,000 over the year. In May, job gains occurred in warehousing and storage (+7,000) and in couriers and messengers (+5,000).

Manufacturing employment continued to expand over the month (+18,000). Durable goods accounted for most of the change, including an increase of 6,000 jobs in machinery. Manufacturing employment has risen by 259,000 over the year, with about three-fourths of the growth in durable goods industries.

Mining added 6,000 jobs in May. Since a recent low point in October 2016, employment in mining has grown by 91,000, with support activities for mining accounting for nearly all of the increase.

In May, employment changed little in other major industries, including wholesale trade, information, financial activities, leisure and hospitality, and government.

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.5 hours in May. In manufacturing, the workweek decreased by 0.2 hour to 40.8 hours, and overtime edged down by 0.2 hour to 3.5 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls remained at 33.8 hours.

In May, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $26.92. Over the year, average hourly earnings have increased by 71 cents, or 2.7 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 7 cents to $22.59 in May.

The change in total nonfarm payroll employment for March was revised up from +135,000 to +155,000, and the change for April was revised down from +164,000 to +159,000. With these revisions, employment gains in March and April combined were 15,000 more than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.) After revisions, job gains have averaged 179,000 over the last 3 months.

end
The real story: a total of 102 million Americans are not in the labour force;
6.1 million official unemployed and 95.9 million folks no longer in the labour force:  total 102 million Americans and of those working a huge  27 million are part timers
(courtesy zerohedge)

Record 95.9 Million Americans Are No Longer In The Labor Force

In what was otherwise a solid jobs report – one which Donald Trump may or may not have leaked in advance – in which the establishment survey reported that a higher than expected 223K jobs were added at a time when numbers below 200K are expected for an economy that is allegedly without slack, the biggest surprise was not in the Establishment survey, but the household, where the unemployment rate tumbled once more, sliding to a new 18 year low of 3.8%, even as the participation rate declined once again, as a result of a stagnant labor force, which was virtually unchanged (161.527MM in April to 161.539MM in May, even as the total civilian non-inst population rose by 182K to 257.454LMM).

What was perhaps more interesting, however, is that for all the talk that the slack in the labor force is set to decline, precisely the opposite is taking place, because in May, the number of people not in the labor force increased by another 170K, rising to 95.915 million, a new all time high.

Adding to this the 6.1 million currently unemployed Americans, there are 102 million Americans who are either unemployed or out of the labor force(and it is also worth noting that of those employed 26.9 million are part-time workers).

In other words, contrary to prevailing economist groupthink, there is a lot of slack in the economy, and if as the latest Beige Book revealed, employers are now hiring drug addicts and felons to make up for the shortage of qualified candidates, a long time will be pass before wages see significant gains.

end
The jobs report seems like fairy tales:  They supposedly added 904,000 full time jobs but lost 625,000 part time jobs in a month that witnessed a downward draft in all hard data
(courtesy zerohedge)

The US Added A Record 904,000 Full-Time Jobs Last Month

Shortly after Trump tweeted his controversial payrolls report preview, in which he hinted today’s payrolls number would be a strong beat, saying “Looking forward to seeing the employment numbers at 8:30 this morning”…

Donald J. Trump

@realDonaldTrump

Looking forward to seeing the employment numbers at 8:30 this morning.

… and which prompted a solid bid in the US dollar ahead of the payrolls number…

… we got the May payrolls report which, indeed, was a beat, but not nearly as substantial as some, even hyperbolically, had expected:

Or perhaps it was, because while looking at the headline Establishment Survey print showed a +223K jump in total jobs, looking at the Household Survey showed one stunning outlier print: in May the number of full-time jobs rose from 127.753 million to 128.657 million, a 904K increase in one month, offset by a 625 plunge in low-quality, part-time jobs.

Putting this surge in full-time jobs in context, it was the biggest monthly increase this century, and also on record if one excludes a few data revision prints recorded in the 1990s.

So when Trump said “Looking forward to seeing the employment numbers at 8:30 this morning”, while the headline print did indeed beat, it was nothing to write home about, the surge in full-time jobs, offset by a plunge in part-time jobs, was certainly historic.

Finally, going back to Trump’s tweet, White House Economic Adviser Larry Kudlow said that President Trump did indeed know about the jobs numbers last night, “but his tweet earlier this morning wasn’t meant to send a signal.”  One wonder if the regulators will share that view.

end

The jobs report is one big joke.  The number that the BLS gave this morning was 223,000 jobs. It seems that ALMOST ALL of this job addition was made up with the fictitious B/D plg AT 215,000. With retail trade in decimation how on earth could this sector we the largest producer of jobs..absolute garbage!!

FROM DAVE KRANZLER OF IRD:

Here’s my tweet: https://twitter.com/InvResDynamics/status/1002544784332 881920

They removed another 170k from the labor force. The labor force participation rate is 62.7%. Outside of Sept 2015-November 2015, you have to go back to February 1978 for a LFPR to be this low. Back then most households only had one wage-earner.

The most glaring fraudulent aspect: They say “retail trade” was the largest producer of jobs. How is that heavenly possible? Retail sales are sagging and serial bankruptcies in brick/mortar retailing is dumping retail labor onto the market wholesale. There are other glaring inconsistencies with economic reality on Main Street. One number that might be realistic: Health care/social assistance is credited with providing 31.7k new jobs. That is possible because that’s primarily Government jobs.

One last point. The birth/death model – which is reported before seasonal adjustments – is credited with throwing in 215,000 jobs in the total pool, which is then statistically “adjusted.” Just not a credible statistic. As we know, the Govt uses the birth/death “model” as “plug” to create jobs that exist only on paper.

END

hard data continues to disappoint.  Strange: we have two national manufacturing reports: Markit and ISM.  Market has continued to show manufacturing dipping each month while the ISM shows manufacturing rising so take your pick as to the correct one:  However prices paid which increases costs to manufacturers hit a 7 yr high on both

(courtesy zerohedge)

US Manufacturing Dipped (Or Bounced) In May As Prices Paid Hits 7 Year Highs

US Manufacturing dipped in May, according to Markit’s final PMI print, sliding from its preliminary print; but US Manufacturing bounced in May, according to ISM, as Prices Paid (highest in 7 years), New Orders, and Employment all jumped.

Decide which one you like…

ISM Prices Paid and New Orders diverged in the last few months but New Orders bounced in May…

Commenting on the final PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“The US manufacturing sector enjoyed another bumper month in May, though continues to run hot.

The past two months have seen the strongest back-to-back improvements in order books since the fall of 2014, fueled by strengthening domestic demand. New orders have in fact now grown at a faster rate than output in each of the past five months, highlighting how producers have struggled to boost production to meet sales. In the words of one manufacturer, “we’re selling more than we can make”.

“The upturn has stretched supply chains to the extent that May saw the greatest lengthening of delivery times in the near-ten year history of the survey. Producers are also finding it difficult to find suitable staff.

With sales growing faster than production, backlogs of work are accumulating at the fastest rate for nearly four years, which should support further production growth in coming months. Business expectations regarding future production in fact picked up again to one of the highest levels seen over the past three years, adding to signs that strong growth will persist through the summer months.”

So everything is awesome – which is odd given the slump in actual ‘hard’ economic data…

end
Morning trading after jobs report:
dollar bid higher, banks higher, stocks higher gold down bond yields higher
(courtesy zerohedge)

Dollar & Banks Bid After Payrolls Beat; Stocks, Bonds, Gold Down

The Dollar is higher after the better than expected payrolls print – and banks are bid – but bonds and stocks are sinking as this removes some of the ‘bad news is good news’ cover for The Fed to slow its roll…

For now the dollar is higher and the rest of the market is down as the payrolls gains signal an increase in hawkishness…

Banks started to rise after Trump’s tweet and extended gains on the beat..

Treasury yields are higher…

But what really matters is – how are markets doing since Trump sent his tweet!?

Already the calls to “lock him up” are echoing through Liberal twitterati.

end

SWAMP STORIES

Comey is grilled as the Feds are seriously considering charging McCabe in a criminal referral.  The only problem here is who is telling the truth McCabe or Comey

(courtesy zerohedge)

Comey Grilled As Feds “Seriously” Consider Charging McCabe In

Criminal Referral

Federal investigators from the D.C. U.S. Attorney’s office recently interviewed former FBI director James Comey as part of an ongoing probe into whether former FBI #2 Andrew McCabe broke the law when he lied to federal agents, reports the Washington Post.

Investigators from the D.C. U.S. Attorney’s Office recently interviewed former FBI director James B. Comey as part of a probe into whether his deputy, Andrew McCabe, broke the law by lying to federal agents — an indication the office is seriously considering whether McCabe should be charged with a crime, a person familiar with the matter said. –Washington Post

What makes the interview particularly interesting is that Comey and McCabe have given conflicting reports over the events leading up to McCabe’s firing, with Comey calling his former deputy a liarin an April appearance on The View.

Justice Department Inspector General Michael Horowitz issued a criminal referral for McCabe following a months-long probe which found that the former acting FBI Director leaked a self-serving story to the press and then lied about it under oath. McCabe was fired on March 16 after Horowitz found that he “had made an unauthorized disclosure to the news media and lacked candor – including under oath – on multiple occasions.” 

Specifically, McCabe was fired for lying about authorizing an F.B.I. spokesman and attorney to tell Devlin Barrett of the Wall St. Journal – just days before the 2016 election,that the FBI had not put the brakes on a separate investigation into the Clinton Foundation, at a time in which McCabe was coming under fire for his wife taking a $467,500 campaign contribution from Clinton proxy pal, Terry McAuliffe. 

The WSJ article  reads:

New details show that senior law-enforcement officials repeatedly voiced skepticism of the strength of the evidence in a bureau investigation of the Clinton Foundation, sought to condense what was at times a sprawling cross-country effort, and, according to some people familiar with the matter, told agents to limit their pursuit of the case. The probe of the foundation began more than a year ago to determine whether financial crimes or influence peddling occurred related to the charity.

Some investigators grew frustrated, viewing FBI leadership as uninterested in probing the charity, these people said. Others involved disagreed sharply, defending FBI bosses and saying Mr. McCabe in particular was caught between an increasingly acrimonious fight for control between the Justice Department and FBI agents pursuing the Clinton Foundation case.

So McCabe was found to have leaked information to the WSJ in order to combat rumors that Clinton had indirectly bribed him to back off the Clinton Foundation investigation, and then lied about it four times to the DOJ and FBI, including twice under oath.

McCabe vs. Comey

Investigators from the D.C. U.S. Attorney’s office were likely to be keenly interested in Comey’s version of whether or not he knew about McCabe’s disclosure.

Comey and McCabe offered varying accounts of who authorized the disclosure for the article. They discussed the story the day after it was published, and Comey, according to the inspector general’s report, told investigators McCabe “definitely did not tell me that he authorized” the disclosure. -WaPo

“I have a strong impression he conveyed to me ‘it wasn’t me boss.’ And I don’t think that was by saying those words, I think it was most likely by saying ‘I don’t know how this s— gets in the media or why would people talk about this kind of thing,’ words that I would fairly take as ‘I, Andy, didn’t do it,’ ” Comey said, according to the inspector general.

During an April appearance on ABC’s The View to peddle his new book, A Higher Royalty Loyalty, where he called McCabe a liar, and said he actually “ordered the [IG] report” which found McCabe guilty of leaking to the press and then lying under oath about it, several times.

Comey was asked by host Megan McCain how he thought the public was supposed to have “confidence” in the FBI amid revelations that McCabe lied about the leak.

It’s not okay. The McCabe case illustrates what an organization committed to the truth looks like,” Comey said. “I ordered that investigation.

Comey then appeared to try and frame McCabe as a “good person” despite all the lying.

“Good people lie. I think I’m a good person, where I have lied,” Comey said. “I still believe Andrew McCabe is a good person but the inspector general found he lied,” noting that there are “severe consequences” within the DOJ for doing so.

Following McCabe’s firing, his attorney Michael R. Bromwich (flush with cash from the disgraced Deputy Director’s half-million dollar legal defense GoFundMe campaign), fired back – claiming that Comey was well aware of the leaks.

In his comments this week about the McCabe matter, former FBI Director James Comey has relied on the Inspector Genera’s (OIG) conclusions in their report on Mr. McCabe. In fact, the report fails to adequately address the evidence (including sworn testimony) and documents that prove that Mr. McCabe advised Director Comey repeatedly that he was working with the Wall Street Journal on the stories in question…”reads the statement in part.

Rebekah Worsham 🇺🇸@RebekahWorsham

: In a newly released statement Andrew McCabe’s attorney, Michael Bromwich, claims McCabe told James Comey on multiple occasions that he was working with The Wall Street Journal.

McCabe vs. the DOJ

McCabe may also find himself at odds with the Department of Justice, as notes he kept allegedly detailing an interaction with Deputy Attorney General Rod Rosenstein raise questions about a memo Rosenstein wrote justifying Comey’s firing. While Rosenstein’s memo took aim at Comey for his mishandling of the Clinton email investigation, McCabe’s notes suggest that Trump told Rosenstein to point to the Russia investigation. Rosenstein’s recommendation ultimately did not mention Russia.

McCabe’s interactions with Rosenstein could complicate any potential prosecution of McCabe because Rosenstein would likely be involved in a final decision on filing charges. McCabe has argued that the Justice Department’s actions against him, including his firing, are retaliatory for his work on the Russia investigation. -WaPo

As the Washington Post notes, lying to federal investigators can carry a five-year prison sentence – however McCabe says he did not intentionally mislead anyone. The Post also notes that while Comey’s interview is significant, it does not indicate that prosecutors have reached any conclusions.

Lying to Comey might not itself be a crime. But the inspector general alleged McCabe misled investigators three other times.

He told agents from the FBI inspection division on May 9, 2017, that he had not authorized the disclosure and did not know who had, the inspector general alleged. McCabe similarly told inspector general investigators on July 28 that he was not aware of one of the FBI officials, lawyer Lisa Page, having been authorized to speak to reporters, and because he was not in Washington on the days she did so, he could not say what she was doing. McCabe later admitted he authorized Page to talk to reporters.

The inspector general also alleged that McCabe lied in a final conversation in November, claiming that he had told Comey he had authorized the disclosure and that he had not claimed otherwise to inspection division agents in May.

Michael Bromwich replied in a statement: “A little more than a month ago, we confirmed that we had been advised that a criminal referral to the U.S. Attorney’s Office had been made regarding Mr. McCabe. We said at that time that we were confident that, unless there is inappropriate pressure from high levels of the Administration, the U.S. Attorney’s Office would conclude that it should decline to prosecute. Our view has not changed.

He added that “leaks concerning specific investigative steps the US Attorney’s Office has allegedly taken are extremely disturbing.”

Whatever Comey told federal investigators, we suspect it eventually boiled down to “McCabe didn’t tell me,” squarely placing responsibility for the leaks – and the lies, on McCabe’s shoulders.

END

Let us conclude the week with this offering from Greg Hunter

(courtesy Greg hunter/USAwatchdog

Mueller Investigation Started by Fraud, Roseanne Dangerous,

Credit Crisis Coming

By Greg Hunter On June 1, 2018 In Weekly News Wrap-Ups

By Greg Hunter’s USAWatchdog.com (WNW 337 6.1.18)

The Mueller investigation into Russia colluding with the Trump campaign was started with FBI paid spies. Congressman Trey Gowdy calls them “informants,” but other top former federal prosecutors call them spies that were hired to plant phony evidence to try and get Trump kicked out of office.

Roseanne Barr was fired from her show, and it was cancelled all because of what ABC called a “racist” tweet involving former Obama advisor Valerie Jarrett. I don’t think Barr was fired for this tweet, but she was fired because she was waking up the masses to what the Deep State and George Soros were doing to America. According to Barr, Soros is trying to initiate an “overthrow of US Constitutional Republic.” The ideas she was putting out on her show were so dangerous to the Deep State they were willing to flush $60 million in revenue a year by cancelling the hit TV show.

Deutsche Bank (DB) is flashing a warning sign again. This time, the FDIS added it to a list of problem banks. Could DB start another credit crisis by imploding like Lehman Brothers did in 2008? DB is so big it makes Lehman look like a kiosk.

Join Greg Hunter as he talks about the top stories from the past week in the Weekly News Wrap-Up.

Video Link

https://usawatchdog.com/mueller- investigation-started-by-fraud-roseanne-dangerous-credit- crisis-coming/

I will  see you MONDAY night

HARVEY

 

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